Vivendi steps up T-Mobile legal fight

28 Feb 2007

It’s the story which refuses to go away. French media giant Vivendi last week stepped up a USD7.5 billion federal lawsuit against T-Mobile USA, Deutsche Telekom and a wealthy Polish businessman, alleging that together they defrauded it out of a USD2.5 billion investment it made in Polska Telefonia Cyfrowa (PTC). Last Tuesday Vivendi filed a 54-page amended complaint with a Seattle court, in the latest move in a complex, seven-year fight. Last October Vivendi filed its original complaint under the federal Racketeer Influenced and Corrupt Organisations (RICO) Act, a law passed to combat organised crime. Vivendi claimed in the filing that Deutsche Telekom illegally appropriated Vivendi’s USD2.5 billion investment in PTC, without compensation. It initially made that assertion in Europe, in 1999, as Deutsche Telekom began investing to increase its 22.5% stake in PTC. Through an investment partner – Elektrim, a Polish company controlled by multibillionaire Polish citizen Zygmunt Solorz-Zak – Vivendi acquired 51% of PTC. But Vivendi maintains it was left with neither its rightful shares of PTC nor its USD2.5 billion after March 2005, when Deutsche Telekom allegedly colluded with Solorz-Zak to assert ownership over Vivendi’s shares, seized physical control of PTC and threw out the management installed by Vivendi. Dozens of hearings in arbitrations and courtrooms – including the Polish and Austrian supreme courts – have failed to yield up Vivendi’s investment.

Last Tuesday’s filing attempts to strengthen its case by adding that T-Mobile USA also: a) enjoyed an unlawful benefit of racketeering by Deutsche Telekom and its European cellular subsidiary, T-Mobile, specifically in the ability to pay USD4.2 billion for additional spectrum at a 2006 Federal Communications Commission auction and b) benefited from that racketeering by gaining the ability to charge more for calls to and from Poland because of the corrupt takeover of PTC.

‘Vivendi regards T-Mobile USA as an indirect beneficiary of both a corrupt global wireless network and of the racketeering conduct of its parent company’s taking over the Polish cellular company,’ said Vivendi attorney Lanny Davis. T-Mobile USA has until mid-March to respond to last week’s filing, which will be argued before U.S. District Judge James Robart.