A French court, in a surprise ruling, on Friday convicted and fined Warner Music Group chairman and CEO Edgar Bronfman Jr. for insider trading and former high-flying Vivendi CEO Jean-Marie Messier for misusing company funds and misleading investors.
Bronfman, a former executive vice president of Vivendi Universal, was fined euro5 million ($6.7 million) and given a 15-month suspended sentence for insider trading around the Vivendi media conglomerate when he was a top executive there. Messier was handed a three-year suspended prison sentence and a 150,000 euro fine.
The unexpected convictions came despite the prosecutor’s recommendations that the two men and other ex-Vivendi executives be cleared of all charges for lack of evidence that they duped investors.
Both said they would appeal the verdict, which deals a blow to the two men once considered masterminds of massive mergers in the media and telecommunications sectors.
Messier was acquitted of charges that he manipulated Vivendi’s stock price during his leadership of the company. His conviction for misusing company funds related to a euro20 million severance package that he eventually renounced.
Two other former Vivendi executives, Eric Licoys and Guillaume Hannezo, were given suspended prison sentences, with Hanzo also getting a 850,000 euro fine. Three others on trial were acquitted.
The conviction came even though the prosecutor had recommended acquittal following the high-profile Vivendi trial last year. She said the executives did not have enough information themselves about the company’s health.
Bronfman’s lawyer Thierry Marembert said he is “disappointed” that the court did not follow the prosecutor’s recommendations and said he would appeal the case and “continue to vogorously defend against this charge.” Bronfman has denied wrongdoing.
The head of a small shareholders’ group that was a party to the case, Didier Cornardeau of APPAC, called the verdict a “huge victory.”
Messier was a star of the French business world during his 1996-2002 reign at Vivendi, when the company expanded from the water utility Generale des Eaux into a major media group.
However, Vivendi’s shares lost more than 80 percent of their value as the company ran up billions of dollars of debt in making acquisitions including the Universal film studios and music label in the United States.
By the time Messier left, Vivendi Universal was swamped under euro 35 billion in debt – prompting the company to sell off many of its businesses, including Universal, to right itself.
Messier was sacked by Vivendi’s board of directors in 2002 and the company underwent drastic restructuring.
In a similar trial in New York, the U.S. District Court in Manhattan ruled a year ago against Vivendi SA and in favor of U.S. and European shareholders who said the media group lied to the public about its shaky finances. The court ruled that Messier himself was not liable.