Motorola ( MOT) agreed to settle litigation over Turkish wireless operator Telsim for $500 million and a contingent stake in future Telsim asset sale proceeds.

Motorola said it will get $500 million in cash upfront, plus the right to receive 20% of the proceeds from the sale of Telsim assets over $2.5 billion. Motorola will drop its litigation against Telsim as well as its pending demand for arbitration against the Government of Turkey at the International Center for the Settlement of Investment Disputes in Washington, D.C. In addition, Motorola won't pursue collection efforts against certain corporate defendants.

Turkey is preparing to auction Telsim off in a proceeding expected to fetch at least $2.8 billion, Reuters reported. The state deposit insurance fund took over Telsim and hundreds of other firms belonging to the controlling Uzan family last year after the collapse of the family's Imar Bank.

The settlement comes more than two years after a federal judge ordered the Uzan family to pay Motorola $4.26 billion. At the time, U.S. District Judge Jed Rakoff said members of the Uzan family "perpetrated a huge fraud" on Motorola in securing money under the guise of financing for Telsim, which five years ago defaulted on $2 billion in loans. He ruled that "the Uzans have siphoned more than a billion dollars of plaintiffs' money into their own pockets and into the coffers of other entities they control."

Starting in 1998, Motorola provided Telsim with equipment financing, financing to purchase a GSM cellular license from the government of Turkey and the major supply components for a GSM cellular telephone system. Telsim's last payment to Motorola took place in June 2000, Motorola said. The company says that beginning in late 2000, the Uzans requested to reschedule loan payments and then began "a campaign of fraudulent tactics" to conceal their looting.

Motorola said in July 2003 that the judge's decision meant the company could collect the damages, half of which are deemed compensatory and half punitive, "from the assets of any company (including 130 companies listed in the court's opinion) the defendants own and/or control, directly or indirectly."

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