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Court Case Reveals Troubles at Motorola

May 18, 2009

A recent lawsuit against Motorola Inc has shed light on the dysfunctional relationships at the top of the major corporation.

The lawsuit is filed by Motorola’s previous chief financial officer, who says he was fired for blowing the whistle on major issues within the company.

Motorola claims that it fired the CFO “for cause,” a term often used for embezzlement.

The case signals more problems for the company, who has already been struggling with major layoffs and billion-dollar losses.

On January 28, Paul Liska, 53, gave a presentation on Motorola’s ailing cell phone division.  One board member commented that Liska’s presentation “sure did poke a stick into the hornet’s nest.”

The presentation resulted in Liska losing his job, instead of putting pressure on the head of Motorola’s cell phone division, as planned.

In the presentation, Liska pointed out that the company’s cell phone unit, Mobile Devices, had missed sales projections for three straight months, were making out-of-reach projections for the current year, and had no forecast for 2010.

Liska finished by saying that Mobile Devices was making decisions “that will be increasingly costly to unwind should the board later decide on a different strategy.”

The remark was directed toward Sanjay Jha, a rising star of the wireless world recruited by Motorola to lead their Mobile Devices branch, and to make it into an independent company.

Motorola has seen losses pile up in its cell phone division, and has been unable to develop a successor to its previously popular Razr phone.Â

Before Liska’s presentation, Jha had met with the board to demonstrate new smart-phone technology that Motorola hopes will allow them to compete with the iPhone by Christmas.  Liska was not a part of this meeting.

According to Liska’s filing, his presentation didn’t get much reaction.  Instead, Liska was approached the next day by Greg Brown, who shares the chief executive title with Jha.Â

Brown informed Liska that he was being replaced as CFO.

Liska claims he was raising a red flag about Mobile Devices’ sales projections, but Motorola claims Liska knew he was going to be replaced, and instead tried to extort the company by setting himself up as a whistle-blower who was being fired for speaking out.

The truth may lie somewhere in between.

Liska may have known that he was on thin ice with Jha.  He had been opposed to Jha’s hiring, his $100 million compensation package, and his co-CEO arrangement.

According to Motorola, Liska’s behavior “markedly deteriorated” after Jha’s hiring.

“Mr. Liska developed what now appears to be a vendetta against Dr. Jha and the Mobile Devices business,” the company claims.

Liska received his job at Motorola because of the company’s tough situation, much like Jha.

From 2001 to 2004, Liska was the CFO of Sears, Roebuck & Co. In the two years before being hired by Motorola, Liska helped private-equity firms revamp their investments as an “industrial partner,” working closely with acquired companies in tough financial situations.

Motorola claims it began to search for a new CFO after a “disastrous performance” from Liska at a board meeting in December.

The company claims he was unable to answer financial questions about the company.

After Brown told Liska he was fired, Motorola kept a straight outward face, saying Liska “did a lot of good work,” and implied that he was replaced because the spinoff of Mobile Devices had been postponed.

Meanwhile, Liska’s lawyer was negotiating with Motorola about his severance.

Liska’s contract guaranteed him about $1.5 million if he were fired without cause.

Motorola claims Liska was asking for $37 million.

Liska filed a “retaliatory discharge” on Feb. 20 in Chicago’s Circuit Court of Cook County. Two weeks later, Motorola said in a regulatory filing that Liska had been fired for cause, a potentially career-killing term.

That’s when the case went public.

Court filings are now filled with colorful language, including Motorola calling Liska “a caustic personality, a disloyal foe out to harm the company.”

Richard Robbins, an Atlanta-based lawyer who has litigated similar cases, says Motorola will have a difficult time convincing a jury that Liska was rightfully terminated for cause.

“Nine times out of 10, these terminations are for personality clashes, and that is not ’cause,’” he said.

Liska may also have a difficult time getting a larger severance than what is guaranteed by his contract. More than anything, Liska can make Motorola look bad.

“CFOs and HR directors are not people you want to be in litigation with, because they tend to know where the bodies are buried,” Robbins said.

Robbins believes the lawsuit will be settled in three to six months.

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