Several purported shareholder class action lawsuits were filed against Motorola and certain of its present and former executive officers in the United States District Court for the Southern District of New York.
According to a “Case Management Order” of the New York’s District Court entered on May 6, 2003, pursuant to F.R.C.P. 42, Section 21D(a)(3)(B)(ii) of the Exchange Act and/or Section 27(a)(3)(B)(ii) of the Securities Action, actions 03cv1094, 02cv10209, 03cv12, 03cv135, 03cv432, 03cv468, 03cv543, were consolidated for all purposes, and according to an “Stipulation and Order” entered on August 11, 2003, the resulting consolidated action were transferred to the Northern District of Illinois.
The consolidated complaint alleges that during the Class Period, Defendants made numerous false statements about transactions between Motorola and Telsim Mobil Telekomunikasyon Hizmetleri A.S. ("Telsim"), a wireless telecommunications carrier with operations in Turkey. On February 3, 2000, Motorola announced that it had entered into a three year agreement to provide products and services to Telsim, and further stated "that revenue from this supplier agreement could be at least $1.5 billion."
More specifically, the Complaint alleges that Motorola failed to disclose that the sales to Telsim were predicated upon Motorola providing Telsim with $1.7 billion in vendor financing, in effect, loaning Telsim the money used to purchase Motorola products and services – and forcing Motorola to bear the enormous risk of default. Defendants further failed to disclose the deterioration of the relationship between Motorola and Telsim (placing the likelihood of payment in greater jeopardy); and also failed to disclose that the Company had, through similar vendor financing arrangements, provided its customers with an aggregate of $2.9 billion in vendor financing for purchases of Motorola products.
The Complaint further alleges that on March 29, 2001, Motorola disclosed in a Proxy Statement filed with the SEC that its vendor-financing commitments totaled $2.6 billion, of which $1.7 billion related to "a single customer in Turkey" (Telsim). On April 6, 2001, reports detailing Motorola’s credit problems caused shares of Motorola stock to decline by twenty three percent (23%). In mid-May 2001, Motorola’s quarterly SEC filing disclosed that Motorola had loaned Telsim $2 billion in vendor financing. Motorola also disclosed that Telsim had failed to make a scheduled payment of $728 million. Telsim eventually defaulted on its obligations to Motorola.
The original Complaint alleges that defendant violated Section 10(b) of the Securities Exchange Act of 1934 and breached his fiduciary duty to the Class by issuing a series of materially false and misleading statements about the Company's financial results. In particular, it is alleged that Motorola's vendor financing commitments were never properly disclosed, including over $1.7 billion in vendor financing to a single customer in Turkey. The Complaint alleges that as a result of these false and misleading statements the price of Motorola common stock was artificially inflated throughout the Class Period causing plaintiff and the other members of the Class to suffer damages.
The parties entered into a Stipulation of Settlement on May 30, 2007. On September 7, 2007, the Court granted final approval of the Settlement, including an award of Attorneys’ Fees and Expenses, and entered Final Judgment.
The Court entered an Order for Distribution of the Settlement fund on March 16, 2009. On July 6, 2011, the Court entered an Order approving second distribution of the Settlement fund.
