Hanging up on Fraud

4 August 2003


Uzans Must Surrender Telsim

Corporate lying, fraud and deceit are often miscast in the media as either acts by honest, but slightly over-zealous, senior management or as battles between corporate elephants and shareholder pygmies. Usually it's a case of "good guys" (those one ideologically supports) bad guys (those one opposes for the same reasons). In the recent Motorola/Nokia case against Telsim, it is hard to cast either in the role. Motorola and Nokia got defrauded, and the courts agreed to support the claims they made against Telsim.

The plaintiffs' shareholders will get, if this award can be enforced, $4.26 billion from the Uzan family, who own Telsim, Turkey's number two wireless phone carrier. The Motorola Credit Corp., the finance division of the eponymous company, loaned or otherwise extended credit amounting to around $2 billion to the Uzan family and Telsim, while Nokia handed over $700 million. The two companies said that the Uzans used most of the money to fund other operations and not the phone services on which the parties had agreed. In damages, US District Court Judge Jed Rakof ordered the Uzans to surrender shares that make up 73.5% of the stock in Telsim.

What is instructive here is that it is a fight among the rich. There is no David and Goliath dimension to this, nor is there anything that militant shareholders on a crusade can claim as their own. Two large business entities (the Uzans may be a family, but a family of billionaires is different) had a falling out, and regulations, laws and courts fulfilled their role.

The children of F.A. Hayek may grouse all they want about excessive government actions throttling business, but in a case like this, the government as referee resolved the problem as it should have. Money was taken improperly, and it has been returned. Theft-by-fountain-pen is wrong and undermines economies as well as people's lives just as surely as theft-by-gun. One only hopes that Telsim can be made into a profitable business for its new owners and for the Turkish consumer.