French regulators fined Vivendi Universal and its former CEO Jean-Marie Messier €1 million ($1.34 million) each yesterday (Dec. 7) for allegedly misleading investors about the media group’s finances during its ill-fated expansion.
In conclusions to a 15-month probe into the circumstances surrounding VU’s near-collapse under heavy debts more than two years ago, market watchdog AMF said Messier had deceived the public when the Hollywood empire he created ran short of cash.
Messier’s lawyer said he would appeal and called the fine “disproportionate” and “gratuitously spectacular.”
“The decision contains important factual and legal errors which purely and simply cast doubt on the complaints which have been upheld,” lawyer Olivier Metzner said in a statement.
Universal Music Group parent VU said it was reviewing its options but that it took issue with certain details of the 24-page finding. It also protested that the AMF had ignored some of its submissions.
The AMF cleared former VU finance director and close Messier aide Guillaume Hannezo of any wrongdoing.
It launched the probe in September 2003 more than a year after Messier’s dream of turning a staid water utility, founded by Napoleon Bonaparte’s nephew, into a global entertainment empire nearly drove the company bankrupt and sent its shares into tailspin.
Messier was sacked in July 2002. The company is now on the mend after his successor Jean-Rene Fourtou sold assets to reduce debt and narrowed the focus to mainly telecoms and music.
The shares, which have roughly doubled in price under Fourtou, closed at €22.71 ($30.51) yesterday to value VU at €24 billion ($32.24 billion).
The AMF investigation covered questions over the transparency of VU’s public statements as it ran into problems servicing its €20 billion ($26.87 billion) of acquisition debt and the way in which it had consolidated its telecoms subsidiaries.
The watchdog said it had cleared VU of wrongly consolidating telecoms subsidiaries Maroc Telecom and Cegetel and said there had been no evidence of any insider trading.
But it found fault with the consolidation of another telecoms subsidiary, Telco, and severely criticized VU’s financial communications.
“Between October 2000 and April 2002 when group financial difficulties rose as fast as its acquisitions, making it increasingly hard to generate the cashflow necessary to stay competitive, Messier … deliberately issued in the company’s name inexact and falsely optimistic information on the consolidation of Telco and (VU’s) debts, cashflow and outlook,” AMF said.
Messier had also “deceived the public, betrayed the confidence of the markets and prejudiced the interests of shareholders,” the AMF report’s summary added.
VU said yesterday that it would separate its top echelons into a supervisory board, chaired by Fourtou, and a management board to be headed by Chief Operating Officer Jean-Bernard Levy.
The board split is the latest effort by a French company to adopt what is widely seen as best practice in corporate governance and had been partly expected.
It also paves the way to a smooth succession to Fourtou, who was plucked from semi-retirement in 2002 to clean up VU.
Fourtou has sold off billions of euros in assets to shore up VU’s balance sheet, including spinning off its film studios into a joint venture with General Electric Co.’s NBC.
— Reuters
