Not Just Business As Usual

Lightly tanned and galvanized by his daily workout, Cem Uzan, 42, is relaxing in a trim blue business suit at his swanky party headquarters in downtown Ankara. Behind him is a wall-length map of Turkey, lit up with red flags of towns and villages he has visited in his first year as a barnstorming politician. He is in an expansive mood. "I believe in certain values in life," he says. "I want to set an example of public service." Politics, in fact, is a welcome pursuit for Uzan, who is leader of the Youth Party. But he is also scion of one of Turkey's richest and most controversial business empires. And business for the Uzan group is not going so well.

In June the government of Recep Tayyip Erdogan seized two major Uzan-owned utilities in southern Turkey for breaching energy regulations, and in July the country's independent banking regulator took over the Uzans' flagship bank, Imar Bank, noting it was "not meeting its responsibilities and posed a danger to the banking system." The five Uzan TV stations were briefly ordered off the air in July for violating broadcasting laws forbidding media owners from using their networks to promote their own political or business interests, and Cem himself is barred from leaving the country because of the bank imbroglio.

And that's just the family's troubles in Turkey. In New York, a judge could rule as early as this week on a fraud and racketeering case brought against the Uzans by Motorola and Nokia. The mobile-phone giants allege that the Uzans lured them into loaning $2.7 billion in cash and equipment to an Uzan-controlled company, Telsim, and that the family had no intention of repaying the loans. Hundreds of millions of dollars of the Uzans' overseas assets have been frozen pending the ruling, which if it goes against them and is upheld on appeal could cost the family $9 billion. "The era of the Uzans' untouchability is over," says Ismet Berkan, chief political columnist of Radikal, a leading left-wing newspaper owned by the Dogan group. "Their empire is unraveling."

The clash marks a watershed in Turkey. If the crackdown is successful, the government will claim a major victory in the fight against Turkey's old way of doing business. That could also help accession talks with the European Union, which has been calling for reforms. And with George W. Bush weighing in on Motorola's behalf last year, redress in the U.S. case would please Washington, with which Ankara is eager to patch up relations after the Iraq war. Failure, however, could see the Uzans emerge politically stronger than ever.

The Uzan business empire is built on humble foundations. The patriarch of the Uzan clan, Kemal, the son of a Bosnian farmer who emigrated to Turkey in the 1920s, built a construction empire in the 1970s and '80s, benefiting from close ties with then Prime Minister Turgut Özal, who in effect brought capitalism to the country. Cem Uzan's initial enterprise was to launch Turkey's first private TV channel, Star TV, together with Özal's son, Ahmet, in 1989. The privatization boom of the 1990s allowed the Uzans to expand into other media and utilities — and to build the country's second-largest mobile-phone carrier, Telsim. Family assets, according to Forbes magazine, now exceed $1.3 billion. And Cem Uzan heads the country's second-most popular political grouping, the Youth Party, which he founded in July last year as a vehicle for his own political ambitions.

But as the Uzans' reach has grown, so too have their troubles. During the telecom boom of the late 1990s, Motorola and Nokia lent $2 billion and $700 million, respectively, to Telsim. The Uzans never paid them back. In 2002, the two firms filed racketeering charges against the family in U.S. Federal Court, accusing them of perpetrating an elaborate scam.

Cem Uzan denies charges of fraud and racketeering in the Motorola case and called the Turkish government's actions a disgrace that he would contest in the European Court of Human Rights. "Erdogan's aim is to destroy our wealth. He believes that [the Youth Party] could not succeed without my funding," he says. "He wants to ban me from political life." Uzan even claims he feels his life is in danger because of political enemies. Adjusting his spotless white cuffs, he says: "What happened to freedom, the European Union? What happened to democracy, Mr. Erdogan?" For the Uzans, enemies have always come with the territory. The family faces scores of civil and criminal lawsuits at home, ranging from extortion to fraud. Siemens, Saatchi & Saatchi and Mark Mobius, the mutual-fund manager, have all alleged they were scammed by the Uzans. The Motorola and Nokia cases, however, are exceptional. It is the first major suit brought against the family outside Turkey.

And the figures involved are staggering. Under U.S. racketeering law Motorola is seeking to triple the $2 billion it says it lost. "I think the proof is very strong that the Uzans are business imperialists of the worst kind, in that they will go to any lengths, including fraud and racketeering, to preserve their business empire," U.S. District Court Judge Jed Rakoff commented at the New York trial in February. Rakoff is expected to rule against the family, which has said it will appeal.