France's market regulator has begun disciplinary proceedings against Vivendi Universal stemming from an inquiry into a November 2002 bond issue and has made complaints about its two top executives.

France's market regulator has begun disciplinary proceedings against Vivendi Universal stemming from an inquiry into a November 2002 bond issue and has made complaints about its two top executives.

Vivendi said in a statement that the AMF said its two top executives, Jean-Rene Fourtou and Jean-Bernard Levy, were party to privileged information concerning the sale of U.S. assets and the exercise of an option to purchase Cegetel shares at a time that the company was issuing mandatory exchangeable bonds in November 2002.

Vivendi denied this was the case.

Both pieces of information could have affected the price that investors were prepared to pay for the bonds when the company sold them.

The AMF claimed that Fourtou and Levy knew that investor Marvin Davis was interested in buying Vivendi's U.S. assets at the time of the bond sale, Vivendi said.

The company, however, said Davis's interest related to assets that were not scheduled for sale and that his offer had been rejected by its board before the mandatory exchangeable bonds were issued.

"This cannot, therefore, be considered privileged information," Vivendi said.

A second charge accuses the two executives of knowing that Vivendi was likely to exercise its pre-emptive rights to buy shares in Cegetel held by British Telecom, also at the time of the bond issue.

Vivendi, however, said that that decision was not taken until later at a board meeting on Dec. 3, 2002.

"At the time of the bond issue, Vivendi's exercise of the pre-emptive rights was no more than a possibility of which the public was perfectly aware," Vivendi said.

The AMF's so-called "notices of grievance" also claim that Vivendi did not provide adequate information on the exchangeable bonds when they were sold to institutional investors.

But Vivendi said it "fully complied with its disclosure requirements as issuer".

The complaints will be contested before the AMF's disciplinary commission.

In December the AMF fined the company and its former CEO Jean-Marie Messier €1 million ($1.3 million) each for allegedly misleading investors about the media group's finances during its expansion phase.

-- Reuters

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