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Cablegate: U.S. Court Ruling Brings Heavy Cash Penalty to Uzan Family

VZCZCXRO8676
PP RUEHDA
DE RUEHAK #2852 3331026
ZNR UUUUU ZZH
P 291026Z NOV 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC PRIORITY 4477
INFO RUCPDOC/USDOC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC
RUEHIT/AMCONSUL ISTANBUL 3573
RUEHDA/AMCONSUL ADANA 2485
RUEHLO/AMEMBASSY LONDON 3203
RUEAFCC/FCC WASHDC
RUEHBS/USEU BRUSSELS

UNCLAS ANKARA 002852

SIPDIS

TREASURY FOR RADKINS AND MMILLS
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK
FCC FOR ATHOMAS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EINV ECPS EFIN TU
SUBJECT: U.S. COURT RULING BRINGS HEAVY CASH PENALTY TO UZAN FAMILY


Sensitive But Unclassified. Please handle accordingly.

1. (SBU) Summary: On November 21, Motorola won an appeal in a
long-standing U.S. fraud case against the Turkish Uzan family, the
former owners of the Turkish GSM company Telsim. The U.S. Court of
Appeals upheld a $1 billion award, which the Uzans had appealed
claiming they could not afford to pay. If the Uzans now fail to
pay, Motorola can request foreign courts to block the family's
assets anywhere in the world. While Motorola looks for Uzan assets
to seize, the Uzan family continues court and arbitration cases
against the GOT and individual bureaucrats, seeking millions of
dollars for the allegedly wrongful seizure of its assets in Turkey.
End Summary.

2. (SBU) Motorola and Nokia lent nearly $2.5 billion to Telsim
during the period 1998-2000 when the company was owned by the Uzan
family. In 2001, Telsim defaulted on the loan. In 2004, the
Turkish State Deposit Insurance Fund (SDIF) seized Telsim and all
Uzan Group companies in an attempt to recoup some of the $6 billion
the state had to put into the Deposit Fund when it took over the
Uzans' collapsed Imar Bank. Motorola persistently fought against
the Uzans in foreign courts, and won judgments against them in the
U.S. and U.K. in 2003. Telsim launched several arbitration cases at
the Zurich Chamber of Commerce in 2002, prior to the Turkish
Government's seizure of the company. The GOT negotiated settlements
with Nokia and Motorola before the company's sale to Vodafone in
2005. The SDIF paid $910 million to Motorola after the sale.

3. (SBU) The U.S. Court of Appeals for the Second District upheld a
2006 $1 billion federal court award to Motorola based on a 2002
fraud suit filed by Motorola and Nokia against the Uzan family. The
court rejected the claims made by the Uzans after last year's ruling
that they could not afford to pay the amount. The court stated that
"the family failed to demonstrate that the award exceeds their
ability to pay."

4. (SBU) Motorola now has to collect the judgment. If the Uzans
fail to pay, then Motorola can seek to block the family's assets
anywhere in the world to enforce the judgment, if it can get local
court approval. Given that all Uzan family assets in Turkey are
under state control, Motorola is unlikely to find any assets here.
The Uzans are thought to have investments in Poland, Jordan and
Switzerland. Motorola's co-plaintiff in other court cases against
the Uzans, Nokia, said in press statements that it would continue to
pursue court cases against the Uzans for $360 million.

5. (SBU) While the U.S.court ruling was good news for Motorola, the
Uzans continue to pose major problems for the GOT. They have
ongoing $40 billion arbitration claims against the government for
the seizure of their energy companies CEAS and KEPEZ. (Note: The
GOT's seizure of CEAS and KEPEZ, based on a 2002 regulation relating
to the Electricity Market Law, was the start of a broad operation
against the family assets. End Note.) The Uzans also took the GOT
to the European Court of Human Rights, claiming the ruling Justice
and Development Party (AKP) seized its companies to politically
destroy the Genc ("Youth") Party led by Cem Uzan. Turkish law
allows individual bureaucrats to be sued in court for decisions they
make as government officials, and the Uzans have filed a record
number of court cases against the high level bureaucrats who were in
charge when their companies were seized. The most recent case,
filed on November 19, claimed $300 million in damages against former
Energy Market Regulatory Authority (EMRA) President Yusuf Gunay.


Wilson

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