French media company Vivendi SA is liable for potentially billions of dollars in damages because it misled investors about its financial condition before a $46 billion merger nearly 10 years ago, a U.S. jury found.
The Manhattan federal court jury cut the potential damages that shareholders in a 2002 securities fraud civil lawsuit sought by about half in a verdict that took them three weeks to reach following a trial that lasted almost four months.
Vivendi will appeal the Jan. 29 decision, the company’s trial lawyer Paul Saunders told reporters after the hearing. The jury was asked 57 questions over whether Vivendi was liable and answered all of them affirmatively.
The jury found former chief executive Jean-Marie Messier and former CFO Guillaume Hannezo not liable for the period of the lawsuit, October 2000 to August 2002, when Vivendi shares lost almost 90% of their value.
“The jury did all the talking,” Messier’s lawyer Michael Malone said. “I’m sure Mr. Messier is delighted.”
Vivendi could be liable for as much as $4 billion, but it was impossible to know the figure until investors make their claims, said shareholder lawyer Arthur Abbey.
“The jury gave us half of what we asked for,” Abbey said. “That was their way of doing justice.”
The lawsuit accused Vivendi and the former executives of misleading investors about Vivendi’s financial condition before a $46 billion, three-way merger with Seagram Co and Canal Plus that transformed the French water utility into a global music and TV giant.
The nine-member jury was asked to calculate damages on a per-share and per-day basis. It identified the daily inflation amount in euros and in dollars per share for each violation. The daily inflation figures were about half what shareholders requested, according to the completed verdict form.
The total that Vivendi may ultimately be liable for cannot be calculated now because it is impossible to know the total number of shares traded by class members, sales dates and how many investors make claims based on the verdict.
Vivendi disagreed with the decision.
“Vivendi believed, and continues to believe strongly, that it did nothing wrong and that this case raises significant legal issues for foreign corporations doing business in the United States that need to be definitively resolved,” the company said in a statement.
Testifying at the trial, Messier maintained that while some of his management decisions went sour, he did not conceal liquidity problems or overstate earnings, and did not seek to enrich himself at Vivendi’s expense.
He said he “never, never, never” committed fraud, and called an allegation that he engineered investor losses “a blatant lie.”
The nine-member jury began deliberations on Jan. 11.
Hannezo’s lawyer Marty Perschetz said: “It was the right verdict. We are confident the company will prevail on appeal.”
Messier was forced out of Vivendi in 2002 after an acquisition spree that saddled the company with large amounts of debt. His successor Jean-Rene Fourtou sold billions of dollars of assets to help shore up Vivendi’s balance sheet.
In 2007, presiding U.S. District Judge Richard Holwell ruled that investors in France, England and the Netherlands, but not Austria and Germany, could participate in the lawsuit.
According to several reports published Jan. 13, a Paris judge blocked Vivendi’s effort to prevent French investors from participating in the class-action lawsuit in New York, even though they could not pursue a similar case in France.
Messier now runs a merger advisory firm, Messier Partners, which has an office in New York.
The case is In re Vivendi Universal SA Securities Litigation, U.S. District Court, Southern District of New York, No. 02-05571.