agreed to pay $50 million to settle
Securities and Exchange Commission
charges stemming from an 18-month-long accounting investigation of the fallen French highflier.
The company's disgraced ex-CEO, Jean-Marie Messier, and another former executive also agreed Tuesday to settle charges stemming from the probe. Messier gave up a multimillion-dollar severance-and-bonus package that had drawn sharp criticism in light of shareholder losses in this once-hot stock. Neither the company nor the former executives either admitted to or denied guilt in the settlement.
The SEC claimed that between 2000 and 2002, the company issued false press releases, made improper adjustments to earnings and failed to disclose future financial commitments. The agency said the fines and disgorgements in the agreement, which also covers former Vivendi financial chief Guillaume Hannezo, will go to shareholders who lost billions in the collapse of the stock.
"This case shows the Commission's ongoing commitment to enforcing the disclosure obligations of issuers," the SEC said, "and it shows our successful use of a new enforcement tool provided by the Sarbanes-Oxley Act."
The agreement also writes yet another unhappy chapter into the already bizarre tale of the water utility that briefly -- and at great cost to investors -- morphed into a media conglomerate. On Tuesday, Vivendi shares fell 27 cents to $23.68.
The deal came as expiration loomed for an SEC order freezing funds due Messier, whose lavish severance pay in the wake of the company's near-collapse caused an outcry this summer. Messier has long since been replaced at the helm by Jean-Rene Fourtou, who has focused on selling off many of Messier's acquired properties and slashing the debt that very nearly inundated the Paris company.
Messier, who was forced out of Vivendi after his music-and-entertainment buying spree nearly brought the company to its knees, had won a severance package valued at some $25 million from the company in an arrangement upheld by the courts. But the SEC sued in September to have the money withheld from the executive, citing its probe of the company's accounting.
The accounting probe began shortly after Messier's July 2002 departure and focused, at least initially, on the company's accounting for its divestiture of a stake in
British Sky Broadcasting
, according to press reports at the time. In 2002, as a mounting liquidity crisis took its toll on investor confidence at the company, Messier repeatedly insisted that Vivendi was adopting more conservative standards.
Alas, the SEC paints a different story.
"During the relevant time period, Vivendi issued misleading press releases authorized by Messier, Hannezo and other senior executives," the agency's complaint says. "The press releases falsely portrayed Vivendi's liquidity and cash flow as 'excellent' or 'strong' and as sufficient to meet Vivendi's future liquidity requirements.
"These statements were misleading in light of Vivendi's inability unilaterally to access the cash flow of two of its most profitable subsidiaries, a situation that substantially impaired Vivendi's ability to satisfy its debt burden and other operating costs."
The agency says the executives also improperly boosted operating-earnings numbers and "failed to disclose future financial commitments regarding two of its subsidiaries."