By Ben White
Washington Post Staff Writer
Saturday, May 31, 2003; Page E01

NEW YORK, May 30 -- Motorola Inc. and one of Turkey's wealthiest families are engaged in a globe-straddling drama that involves seized planes, charges of computer hacking and physical threats, accusations that billions of dollars have been stolen and nasty court fights and media campaigns.

The latest twist in the byzantine three -year legal disputeoccurred this week when Motorola, a global telecommunications company, found itself on the receiving end of blistering full-page newspaper ads accusing it of misleading its shareholders. The ads were paid for by Telsim Mobile Telecommunications Services Inc., a Turkish company controlled by the Uzan family, one of the best-known families in Turkey.

In 1998, Motorola, along with Finland's Nokia, began lending money to Telsim to build a telecommunications network in Turkey, a country of 68 million that at the time had little cell phone service and was viewed as a potential telecom gold mine.

In 2000, as the U.S. telecom bubble burst, Motorola expected Telsim to begin repaying the loans. Both sides agree that only a small fraction of the $2 billion has been repaid.

The two sides have since taken a series of actions unusual in business disputes, with Motorola accusing the Uzan family of violating U.S. racketeering laws, which were drafted to help the government combat organized crime, and Telsim attempting to rally shareholders to its side, arguing in ads in major U.S. newspapers that Motorola has not been honest with its investors about its deal with Telsim.

The dispute may come to a head here in the coming days. Lawyers in the case expect a federal judge to rule soon on fraud charges lodged by Motorola against the Uzan family as well as on whether Motorola and Nokia can proceed with a case against the Uzans based on racketeering law.

A Motorola attorney said the company filed its case under racketeering law because Motorola believes the Uzan family conspired to steal billions from Telsim. The Motorola attorney said the only way the company will recover the loan money is to get it from the Uzans themselves. Racketeering law provides for penalties against organizations that engage in widespread corrupt or fraudulent practices.

Telsim officials call the racketeering charges ludicrous and say Telsim has been slow to pay because a pair of earthquakes in 1999 and the devaluation of the country's currency hammered Turkey's economy and along with it Telsim's balance sheet.

Motorola and Nokia also filed claims against the Uzans in British court.

The Uzans have so far refused to recognize the authority of any U.S. or British courts to rule on the dispute. They have declined to show up for hearings or depositions and have ignored various court orders.

Telsim spokesmen say the original loan agreement included precise language designating arbitration in Switzerland as the proper forum to resolve disputes about the loans. Telsim also says much of the Motorola equipment purchased with the loan was defective and some of it was forced on the company so that Motorola could inflate its sales figures. Motorola denies both accusations.

Motorola, backed by a ruling from federal court, says the Uzans are using Swiss arbitration to block Motorola's attempts to recoup the loan money.

Because of Telsim's refusal to appear for depositions or comply with court orders, courts in New York and London have ordered Uzan family assets frozen and held family members in contempt. A London court sentenced to prison terms four Uzan family members, including patriarch Kemal Uzan, with a net worth of $1.3 billion listed by Forbes magazine as one of the richest men in the world.

Spokesmen for Telsim say because the company does not recognize the jurisdiction of the U.S. or U.K. courts, the contempt rulings and prison sentences are meaningless.

On Thursday a federal judge ordered a plane Motorola maintains belongs to the Uzans held at an airport in Connecticut. Late last year the French government, clamped the wheels of an Uzan plane when it landed there in compliance with the order in London for worldwide seizure of Uzan assets.

Meanwhile, Motorola alleges that Telsim officials hacked into its computer system and filed baseless charges in a Turkish court saying Motorola and Nokia had made threats against members of the Uzan family. A Telsim spokesman denied the hacking charges. He added that the court filings in Turkey were merited because Motorola hired professional detectives to investigate Telsim and the Uzan family.

Motorola also says that Cem Uzan, son of Kemal, attempted to win a seat in Turkish parliament to get immunity from any judgments. A Telsim spokesman has denied that. In any event, Cem Uzan lost his bid for parliament.

The Telsim spokesmen said the firm has been running the newspaper ads rather than mount a formal defense against Motorola's charges.

The ads, prepared with the help of a New York-based public relations firm, Abernathy MacGregor Group Inc., say that Motorola failed to properly disclose to shareholders that between 1998 and 2000 it loaned $1.9 billion to Telsim to purchase cell phone equipment. The ad says Motorola then booked some of the loans as sales, inflating its revenue.

The ads assert that Motorola has misled its investors for years, bragging about the potential revenue of the deal with Telsim in press releases but not disclosing the loans. The ads note that 19 shareholder lawsuits have been filed against Motorola regarding the loan disclosure and cite comments made by former Securities and Exchange Commission chairman Arthur Levitt critical of the "vendor financing" arrangement.

Levitt declined today to comment on the dispute.

"We want Motorola shareholders to understand where we stand on this and where their management stands," Telsim spokesman William Clutterbuck said from London. "We think that the best thing for Motorola shareholders would be for the company to meet in Switzerland to agree to a way forward for both companies. . . . We will continue to bring forward information we feel Motorola shareholders should have."

In a prepared response, Motorola called the ads "yet another attempt by the Uzan family to muddy the waters and hide the fact that they have stolen billions of dollars."

The statement added: "Increasingly, the courts are finding that the Uzans are involved in questionable and illegal business activity globally. . . . Motorola's primary interest in all of this is to recoup the money that this family of fraudsters has stolen from Motorola's shareholders."

A Motorola spokeswoman said the company's disclosure procedures and accounting were proper.

The Telsim ads surprised some experts in corporate disclosure and governance.

"This is a very unusual way to go about settling a contract dispute," said Charles Elson, director of the corporate governance research center at the University of Delaware. "It seems to be an attempt to embarrass Motorola in front of its shareholders."

Elson and others said Telsim is hoping that shareholders will pressure Motorola to give up the fraud and racketeering cases and to agree to the Swiss arbitration. These people note that Motorola is already being criticized by shareholders on other issues. At Motorola's shareholder meeting earlier this month, angry investors criticized the company's poor stock performance and the $1.5 million bonus recently awarded to chief executive Christopher B. Galvin.

While Motorola shows no sign of backing down, Telsim's attacks do seem to be resonating with some shareholders. Lawyers representing shareholders say that while neither side has behaved well in the dispute, Telsim's allegations that Motorola failed to properly disclose the loans are accurate.

"They had a concentration of debt to one vendor, which they knew at the time wasn't credit-worthy, and we believe they extended the debt to help make their revenue numbers," said Robert Finkel, an attorney representing investors in a class-action suit against Motorola over the loan disclosure. "But neither side is wearing a white hat here and the lack of disclosure does not excuse Telsim from making a reasonable effort to pay back this money."