French police went sniffing for evidence of financial misdeeds at Vivendi Universal’s Paris headquarters, its telco subsid Cegetel and at the homes of former CEO Jean-Marie Messier on Thursday, seizing a bevy of documents.
The search may be the first of several the company will face over the next few weeks.
Prosecutors are looking into whether Viv U knowingly issued false financials for 2000 and 2001 while misleading investors about its fiscal health and future prospects. Company is also subject to a Securities & Exchange Commission probe in the U.S. Critics say that, at the very least, Messier was liberal with the truth in an effort to bolster the company’s sagging share price.
Plainclothes officers from the financial unit of the Paris Prosecutor’s Office rummaged inside Viv U’s headquarters for nine hours Thursday, emerging with “piles of documents,” a source close to the investigation said. The police, with a parade of photographers and journalists in tow, also paid uninvited visits to the offices of Cegetel, as well as Messier’s Paris apartment and country home in Rambouillet.
Three magistrates probing claims that Viv U misled shareholders and the stock market with false financial info during Messier’s reign ordered the surprise raids.
In a statement Thursday, Vivendi Universal said it would cooperate fully with the criminal probe. “This procedure follows the filing of a claim against an unnamed party in July. The company emphasizes that it is a plaintiff claiming damages in these proceedings.”
Chief financial officer Jacques Espinasse said that Viv U’s accounts “are reliable and honestly reflect the situation of the company.”
The Small Shareholders Assn. — whose complaint prompted the inquiry — lauded the police action.
Association lawyer Frederik-Carel Canoy, who claims to have found seven different versions of Viv U’s 2001 financial results, said he would be looking closely at the seized documents for evidence to support the body’s complaints.
Canoy also asserts that Messier misled the public about Cegetel’s cash flow, alleging that Viv U inappropriately consolidated on its income statement some $1.3 billion in cash flow to which it did not have access.
Canoy is penning a book, “The Seven Annual Reports of Vivendi Universal … and Others,” that he said will draw parallels between the media conglom and Enron.
He also criticized Viv U under new CEO Jean-Rene Fourtou for remaining opaque in its financial affairs. When it ordered PricewaterhouseCoopers to do an independent audit of its book, the conglom claimed no fraud had been found but refused to publish the audit.
Viv U has consistently denied accounting fraud. At a press conference in September, Fourtou and Espinasse told journalists the books were all in order.
France’s respected Minority Shareholders Assn. believes that there was never any Enron-style accounting fraud at Viv U, which is why it has opted to pursue the company through the civil courts in the U.S.
Plaintiffs in that class action have until Tuesday to deposit evidence with a federal court in New York.
“People say French justice is slow, but this time it’s acting very quickly,” Didier Cornardeau, president of the Small Shareholders Assn., told Daily Variety. “The decision has been taken to make an example of Vivendi Universal so that confidence in the markets can quickly be restored.
“Criminal charges against Vivendi before the end of the year would be the best Christmas present small shareholders could have.”
Viv U amassed some $19 billion in debt by the time Messier was ousted in July, while its shares have lost 75% of their value this year. So far in 2002, the company has collected nearly $4 billion in cash from asset sales, and it is planning to generate nearly $7 billion by year’s end.
The biggest outstanding question remains the fate of Vivendi Universal Entertainment, where corporate machinations by titular head Barry Diller and would-be buyer Marvin Davis continue to fuel financial intrigue and confusion at U HQ.
Fourtou held further talks with Davis’ investment team Wednesday, while reports of cost-cutting by minority shareholder and CEO Diller continue to surface.