Vivendi, Messier Face Fines Under Deal with SEC

26 December 2003

Vivendi Universal and its controversial ex-ceo Jean-Marie Messier have agreed a multimillion-dollar settlement with US financial regulators to avoid civil action.

The Securities and Exchange Commission had filed a suit accusing both parties -- plus former chief financial officer Guillame Hannezo -- of accounting fraud. But under the settlement, it will end its year-long investigation.

The deal is a costly one for the accused trio. The SEC has barred Messier from serving as a director at a US-listed company for ten years. It has denied the one-time chief executive his €20.5 million ($25.4m; £14.4m) severance pay and fined him a further $1m. It has imposed a $50m civil penalty on Vivendi. And it has punished Hannezo with a $120,000 fine plus a five-year ban on US directorships.

The French media giant has been at loggerheads with Messier over his golden goodbye for months. The company -- which was left on the verge of bankruptcy after he led it on an acquisition spree -- claims the payoff was never formally approved by the board.

In September, the SEC froze Messier's handout for 90 days while it investigated the accounts published by Vivendi under his stewardship. That period expired this week, with the two sides facing legal action unless they struck a deal [WAMN: 24-Dec-03].

In its planned lawsuit, the SEC alleged that, under Messier, certain Vivendi press releases incorrectly portrayed the company's cashflow as "excellent" or "strong".

It was also claimed the company made "improper adjustments" to profits so they would meet "ambitious" targets. The SEC believes that earnings before interest, tax, depreciation and amortisation were hiked by €59m in Q2 2001 and by €10m in the following quarter.

"The statements," declared the lawsuit, "were materially misleading and falsely presented Vivendi's financial situation. As Vivendi and its executive officers, including Messier and Hannezo, knew or were reckless in not knowing, the company's financial condition at this time was worse than Vivendi indicated."

However, under the terms of the settlement with the SEC, Vivendi, Messier and Hannezo are not required to admit or deny the accusations.

The fines imposed on the trio will be paid into what is known as a Fair Fund, which will be used to compensate long-suffering Vivendi shareholders.

Messier said the decision to relinquish his payoff and pay a fine "represents a personal sacrifice for me, but it is a considerable consolation that the funds will be used to benefit Vivendi shareholders." Such noble sentiments may give little cheer to investors whose holdings have plummeted in value since the company's near-fatal cash problems came to light.

Meanwhile, current Vivendi chairman/ceo Jean-René Fourtou declared: "We are pleased to close this chapter of our history, to put this matter behind us and to continue to work for the benefit of our shareholders."

But despite Fourtou's insistence that the subject is closed, Vivendi and Messier are still under investigation by French regulators. There may yet be further fallout from the Messier era.

Data sourced from: multiple sources; additional content by WARC staff