Motorola 2004 Annual Report Download - page 30

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interim relief, Motorola has deposited approximately $44 million in a specially designated account in India, and the
Indian Supreme Court has accepted for a full hearing at a later date Motorola's appeal regarding interim relief.
Shareholder Derivative Case
M&C Partners III v. Galvin, et al., Ñled January 10, 2002, in the Circuit Court of Cook County, Illinois, is a
shareholder derivative action Ñled derivatively on behalf of Motorola against Ñfteen current and former members of
the Motorola Board of Directors and Motorola as a nominal defendant. The lawsuit alleges that the Motorola
directors breached their Ñduciary duty to the Company and/or committed gross mismanagement of Motorola's
business and assets by allowing Motorola to engage in improper practices with respect to Iridium. In October 2003,
the court dismissed plaintiÅ's amended complaint in its entirety without prejudice. In May 2004, plaintiÅ Ñled a
motion for leave to Ñle a second amended complaint and served a demand on the Motorola Board of Directors to
investigate the alleged wrongful conduct. At a July 10, 2004 Special Board Meeting, Motorola's Board appointed an
investigatory committee to: (i) evaluate the plaintiÅ's demand, and (ii) report back to the Board with a
recommendation.
An unfavorable outcome in one or more of the Iridium-related cases still pending could have a material
adverse eÅect on Motorola's consolidated Ñnancial position, liquidity or results of operations.
Telsim-Related Cases
Motorola is owed approximately $2 billion under loans to Telsim Mobil Telekomunikasyon Hizmetleri A.S.
(""Telsim''), a wireless telephone operator in Turkey. Telsim defaulted on the payment of these loans in April 2001.
The Company fully reserved the carrying value of the Telsim loans in the second quarter of 2002. The Company is
involved in the following legal proceedings related to Telsim. The Uzan family formerly controlled Telsim. Telsim
and its related companies are now under the control of the Turkish government.
U.S. Case
On January 28, 2002, Motorola Credit Corporation (""MCC''), a wholly-owned subsidiary of Motorola,
initiated a civil action with Nokia Corporation (""Nokia''), Motorola Credit Corporation and Nokia
Corporation v. Kemal Uzan, et al., against several members of the Uzan family, as well as one of their employees
and controlled companies, alleging that the defendants engaged in a pattern of racketeering activity and violated
various state and federal laws including Illinois common law fraud and the Racketeer InÖuenced and Corrupt
Organizations Act, commonly known as ""RICO''. The suit was Ñled in the United States District Court for the
Southern District of New York (the ""U.S. District Court''). The U.S. District Court issued its Ñnal ruling on
July 31, 2003 as described below.
Upon Ñling the action, MCC and Nokia were able to attach various Uzan-owned real estate in New York.
Subsequently, this attachment order was expanded to include a number of bank accounts, including those owned
indirectly by the Uzans. On May 9, 2002, the U.S. District Court entered a preliminary injunction conÑrming the
prejudgment relief previously granted. These attachments remain in place.
The U.S. District Court tried the case without a jury to conclusion on February 19, 2003. Subsequent to the
trial of the case, and before a Ñnal ruling had been issued, the U.S. Court of Appeals for the Second Circuit (""the
Appellate Court'') issued an opinion on March 7, 2003 regarding a series of appeals Ñled by the Uzans from the
U.S. District Court's earlier rulings. In its opinion, the Appellate Court remanded the case back to the U.S. District
Court on the grounds that the RICO claims were premature and not yet ripe for adjudication. The Appellate Court
directed that the RICO claims be dismissed without prejudice to their being later reinstated. The Appellate Court,
however, upheld the May 2002 Preliminary Injunction, Ñnding that it was suÇciently supported by the fraud claims
under Illinois law.
In accordance with the mandate from the Appellate Court, on April 3, 2003, the U.S. District Court dismissed
the RICO claims without prejudice. On July 8, 2003, MCC Ñled a motion seeking to have its RICO claims
reinstated on the grounds that pursuing further actions against Telsim would be ""futile.''
On July 31, 2003, the U.S. District Court entered a judgment in favor of MCC for $4.26 billion. The
U.S. District Court declined to reinstate the RICO claims (without prejudice to reinstatement), but held that the
court had jurisdiction to decide the merits of the Illinois fraud claims. MCC's fraud claims under Illinois common