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French begin Vivendi probe

Regulators scrutinizing company's finances

PARIS — French financial regulators are probing the past 17 months of Vivendi Universal’s books, as the beleaguered media giant continues to negotiate with banks after securing a $993 million loan Tuesday evening.

Recently, reports have been circulating that Viv U engaged in irregular accounting practices on several fronts. The Commission des Operations des Bourse, the French equivalent of the SEC, said last week that it had reviewed the manner in which a sale of shares in Blighty’s BSkyB was handled in Viv U’s 2001 books, but said the accounts had been in line with French rules.

The regulators confirmed that investigators had already begun examining documents “related to the financial information released by Vivendi,” in a statement released after the local stock market closed.

Nevertheless, the probe comes at a time when a lack of financial disclosure in the U.S. has forced regulators to clamp down on offenders.

However, Daniel Bouton, head of Societe Generale, one of Viv U’s main creditor banks, denied any comparison with troubled American company Enron. “Enron was fraudulent,” he said Sunday, while Viv U “was healthy.”

However, “clarification is needed,” said Sean Eddie, a Bank of America analyst, adding that, even so, “any investigation by a regulator is not going to be helpful.”

The news overshadowed Viv U’s short-term loan deal with a consortium of banks made up of BNP Paribas, Societe Generale, Deustche Bank, Credit Lyonnais, Credit Suisse First Boston and Citigroup.

The coin gives it operating funds for three months: The conglom is still negotiating another $2.7 billion loan with a larger group of banks.

The state of Viv U’s finances has been the subject of much speculation after its huge debts and losses for 2001 were revealed at the beginning of this year. French daily Le Monde actually published an article in April declaring that the company was bankrupt.

Investors have criticized Viv U for failing to give a clear picture of the company’s performance, while ousted topper Jean-Marie Messier’s $77 billion in acquisitions made contrasts with past performance misleading.

Jean-Rene Fourtou, who replaced Messier as CEO last week, said then that the company faced a “liquidity crisis.” Prior to that, Messier had told investors the company had no cash problems.

Viv U shares had closed up 1.7% at $18 in Paris but the news forced prices down as much as 7.1% on the New York Stock Exchange.

(Reuters and Bloomberg contributed to this report.)

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