People

Ex-CFO Sues Motorola for Firing Him

But the telecom fires back that Paul Liska behaved like an extortionist.
David KatzApril 10, 2009

Claiming that he was fired by Motorola on January 29 in retaliation for refusing to accept “unsubstantiated and misleading financial forecasts” by the company’s Mobile Devices unit, ex-CFO Paul Liska is suing the telecom for $1.5 million in severance pay plus punitive damages, according to Liska’s complaint.

Responding to his charges, however, Motorola asserted that Liska’s conduct was not that of a “whistleblower” but more like that of “an (attempted) extortionist.” Liska’s lawsuit, Motorola’s response, and Liska’s rebuttal, which were filed in Cook County, Illinois, circuit court in March, were unsealed Thursday after the judge ruled that some Motorola financial data could be redacted from the ex-CFO’s complaint.

On February 3, the day Motorola announced Liska was leaving the company, it reported that its mobile-phone sales were $2.35 billion, down 51% compared with the same quarter a year ago. The operating loss on the cell-phone business was $595 million, compared with an operating loss of $388 million last year. In January Motorola had announced it would cut 4,000 positions, including 3,000 associated with its mobile-devices business.

In his suit, Liska recounted that he went to the Motorola board’s audit committee late last year and criticized the ability of the mobile-devices unit, which brought in about 40% of the company’s 2008 revenues, to accurately predict consumer sales. The company has been hoping to spin off that unit.

Shortly after that, the former finance chief asserted, he was fired because of that criticism and his statement that the company had no viable strategic plan for the unit in 2009. He also warned the committee that Motorola’s credit rating would sink below investment grade when credit-rating agencies detected that there was a lack of a basis for the company’s forecasts for the unit.

Liska claimed that when he was provided with the unit’s draft forecasts for this year, he “saw that important aspects of these forecasts were based on inaccurate or unsupportable financial assumptions, and ignored material facts and information.”

A day after a private meeting with the audit committee in which he told its members of his concerns, Liska claimed, he “was discharged in retaliation for his refusal to accept Mobile Devices’ unsubstantiated and misleading financial forecasts.”

For its part, Motorola said its forecasting failure was common in the industry. The worldwide financial meltdown “has affected the mobile phone industry as much, if not more than, any other industry, and the fact that forecasts had to be revised downward in the midst of this crisis is hardly remarkable and was well known to the Motorola Board,” the company said in its legal rejoinder. “Motorola’s competitors had to revise their forecasts in the fourth quarter as well.”

The company also harshly criticized Liska, who joined Motorola in March 2008. “During his brief tenure, he proved himself to be erratic, unprepared, abrasive, divisive-and often simply absent and ‘unavailable,’” Motorola claimed, apparently quoting Liska’s administrative assistant. By mid-December, the company asserted, management had made the decision to remove him as CFO and begun to search for a replacement. After Liska learned of this decision, Motorola contended, he staged the meeting with the board in order to extort extra money from the company.

Before he joined Motorola, Liska was a partner at a number of private-equity firms, including MidOcean Partners, CVC Capital Holdings, and Ripplewood Holdings. From 2004 to 2006, he was a director of US Freightways, serving as executive chairman in 2005 “until he orchestrated the company’s successful sale to Yellow Roadway Corp.,” he said in his complaint. From 2001 to 2004, he held various posts at Sears, Roebuck, including CFO, and from 1997 to 2001, he was finance chief at the St. Paul Cos.