Motorola: Former CFO Alleges Misstated Internal Forecasts

In court documents, Paul Liska alleges the company's projections for its mobile-phone business were in error and he was unlawfully fired

By Roger O. Crockett

The curious case of Paul Liska's departure as Motorola's (MOT) chief financial officer just became more bizarre. In court documents supplied to BusinessWeek by Cook County (Ill.) court officials, Liska details differences with his former employer, alleging that the Schaumburg (Ill.)-based cell-phone maker repeatedly misrepresented the financial performance of its Mobile Devices unit and that he was unlawfully dismissed.

In a complaint filed in late February in Cook County Circuit Court and held under seal by Judge Allen S. Goldberg until Apr. 9, Liska says he became increasingly alarmed over what he considers misstatements of the division's performance. He also alleges that he was unlawfully fired when he brought his concerns to the attention of the board. The documents, along with Motorola's response, depict an increasingly acrimonious relationship between Liska and Motorola's management against a backdrop of worsening financial performance in what was once its flagship business.

During the fourth quarter of 2008, Liska began to "develop concerns that the executives within the Mobile Devices Business were, intentionally or recklessly, materially misstating its 2009 forecasts and strategic plan," according to the filing. In his view, the forecasts were "based on inaccurate or unsupportable financial assumptions." Liska, the complaint says, warned Motorola's board of directors about the "continual forecasting errors," saying that they would have "a significant deleterious impact on Motorola's credit ratings and relationships, particularly if Mobile Devices' actual results continued to fall well short of its actual forecasts."

Whistleblower Claim

In the complaint, Liska alleges "retaliatory discharge," legalese for a whistleblower lawsuit, saying his firing "violated mandated policy that favors full disclosure, truthfulness and accuracy in financial reports." The lawsuit also alleges a breach of contract; Liska, who had been hired in March 2008, says he has not received the severance pay he is owed. Liska is demanding a jury trial.

In a response filed with the court in late March and cited by the Chicago Tribune, Motorola called Liska a "treacherous officer" who concocted a "scheme designed to portray himself as a whistleblower and demand millions in return for his silence." Liska's departure was announced publicly on Feb. 3. Company officials, after analyzing the events preceding the exit, decided on Feb. 19 to terminate him for cause due to "serious misconduct and incompetence," according to Motorola's filing, which could not immediately be obtained by BusinessWeek.

According to Liska's account of the events, Motorola co-CEO Greg Brown dismissed Liska on Jan. 29 and announced his exit on Feb. 3 during a quarterly earnings call. But it was in an SEC filing that Motorola officially terminated him with cause due to "serious misconduct and incompetence." Liska claims the 16-day lag from Feb. 3 to Feb. 19 gave Motorola's lawyers enough time "to concoct the false and malicious story" and said the company was trying to "destroy his reputation in retaliation for raising legitimate concerns" about Motorola's hobbled cell-phone division.

Motorola's cell-phone business has been buffeted by a lack of devices that resonate with users and a loss of market share to competitors. Motorola tried to sell the division but failed to find a buyer and now is considering spinning it off. Motorola spokesman Rusty Brashear said the company can't comment beyond what's in the court documents.