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A federal judge has ordered members of a wealthy Turkish family arrested for contempt and held them liable for well over $4.2 billion in compensatory and punitive damages for defrauding Motorola Credit Corp. and Nokia Corp. on telecommunications deals in Turkey. Southern District of New York Judge Jed S. Rakoff said members of the Uzan family “perpetrated a huge fraud” in inducing the companies to provide loans for telecommunications equipment, and then concealed their scheme through “an almost endless series of lies, threats and chicanery” that included filing bogus criminal charges against American and Finnish executives in Turkey. Rakoff, in a 173-page opinion released Thursday, said the Uzans, reputedly one of the richest families in the world with ownership or control of more than 130 companies, “repeatedly” disobeyed the “orders of this court.” The allegations in the civil lawsuit, Motorola Credit Corp. v. Uzan, 02 Civ. 666, are based in part on $2.7 billion in transfers that Motorola and Nokia made between April 1998 and September 2000 to finance an expansion of Telsim, a business controlled by the Uzan family. “Actually, however, the Uzans intended to divert a large part of these funds to other entities they controlled and to their own pockets, so as to fund their economic empire and to pay for such personal items as private airplanes, yachts, helicopters and multi-million dollar apartments in New York and elsewhere,” Judge Rakoff said. He added that the refusal of the Uzans to comply with discovery orders “leaves uncertain the full extent of fraudulent diversion.” Motorola and Nokia were under the impression the loans were fully collateralized, but in fact, family leader Kemal Uzan, his sons and other relatives and associates diluted shares in one company that was serving as collateral, then stripped the collateral of its voting rights entirely. And when investigators from the two companies traveled to Turkey to probe Telsim’s default, the Uzans falsely accused executives with Nokia and Motorola of threatening to kill members of the family. Judge Rakoff last year issued an injunction against the clan to prevent them from wasting the remaining collateral — an order he said Thursday “they contemptuously refused to obey.” HEARINGS AND TRIAL The judge conducted two evidentiary hearings and a trial. But after trial, the 2nd U.S. Circuit Court of Appeals ordered that racketeering charges against the Uzans be dismissed as unripe. The 2nd Circuit found that the plaintiffs could not pursue the triple damages remedy of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. �� 1961 and following, because they had failed to pursue all of their contractual remedies, such as foreclosing on the collateral and seeking damages through arbitration. With the understanding that the racketeering claims could be reinstated once they become ripe, the case was returned to Rakoff for motion practice that ended with several rulings by the judge. He rejected the Uzans’ motion to dismiss for forum non-conveniens, their request that he dissolve the preliminary injunction and attachment orders, and void his findings of contempt against the family. Judge Rakoff also granted the plaintiffs’ motion for a further finding of civil contempt. As to the RICO charges, Rakoff had sympathy for the plaintiffs’ claim that foreclosing on Telsim and pursuing arbitration would be fruitless. Nonetheless, he said the time was still not ripe for reinstatement of the charges. “The fact that the value of the collateral has been hugely diminished and made more difficult to realize does not make it worthless,” Rakoff said. He therefore dismissed the federal claims against the Uzans, with the RICO claims dismissed without prejudice, but he refused to dismiss state claims for common-law fraud, promissory fraud and civil conspiracy. Among the findings of fact in the opinion, Rakoff said that “in an effort to avoid redress for their wrongs and further subvert the administration of justice, defendants have carried their fraud into this and other courts by … defying court orders, concealing information from the Court, and falsely representing facts to the Court.” Motorola will receive the lion’s share of the damages award: a total of $4.2 billion. Both Motorola and Nokia will be converted into equitable owners of Telsim shares, and if the defendants fail to transfer those shares, Nokia will receive more than $850 million. And if the defendants do not purge their contempt, Judge Rakoff said they will be arrested if found “within the jurisdiction of the United States.” The Uzan family was represented by Robert Serio of Gibson, Dunn & Crutcher, and Stan Mortenson of Baker Botts in Washington, D.C. Motorola was represented by Howard Stahl of Steptoe & Johnson. Nokia was represented by Jason Brown of Holland & Knight.

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