A verdict against Vivendi

Verdict sets stage for multibillion-dollar payout

A jury has decided in favor of U.S. and European shareholders who argued that the Paris-based Vivendi media group lied to the public about its shaky finances. Verdict sets the stage for the possible distribution of several billion dollars in damages to investors.

The company, but not its executives, was found liable, according to the verdict Friday in U.S. District Court in Manhattan.

Vivendi said it will appeal. Lawyers on both sides said any potential payouts, should an appeal fail, would be more than a year away. The jury deliberated 14 days before reaching its verdict.

Plaintiffs said in a release that the potential payout to investors could total $9.3 billion. A lawyer for Vivendi said it was impossible at this stage to estimate actual damages because it was not clear how many were in the class and who will seek payouts.

Regardless, shareholders’ attorney Arthur Abbey said he believed the award was the largest securities class action jury verdict in history, measured by the number of people affected and the dollars involved.

He said plaintiffs were elated.

Thousands of investors from the U.S., France, England and the Netherlands said Vivendi covered up its troubles in 2001 and 2002 as the onetime public water company grew into a media and communications empire. Company flirted with bankruptcy before reorganizing successfully.

Jean-Marie Messier, who took over the company’s top post in 1996, was forced out as CEO in July 2002, when the company was known as Vivendi Universal.

Defendants in the trial were Vivendi, Messier and former chief financial officer Guillaume Hannezo.

The jury concluded on 57 separate claims that Vivendi was 100% responsible for misstatements or omissions that misled shareholders. It concluded that Messier and Hannezo were not responsible.

It found that Vivendi acted recklessly rather than knowingly in the damage the jury found that it caused. It also concluded that at times the misstatements or omissions inflated the company’s stock by as much as $11.

The amount of money plaintiffs will receive if the verdict does not get reversed is based on the jury’s calculation of how much the shares were inflated as a result of Vivendi’s alleged misdeeds.

In a statement, lawyers for the plaintiffs said: “This verdict shows that deserving investors can get just compensation through class actions, even against the strongest opposition.”

During the trial, Messier testified that he acted in good faith when he tried to expand a French water company into a global media giant. But he said he did not foresee technological limitations and worldwide financial problems that contributed to its near-bankruptcy in 2002.

“Some of my management decisions turned wrong, but fraud? No. Never. Never. Never,” he said.

Beginning June 2, Messier will stand trial in France on charges of misleading investors over the company’s financial health while he was transforming the once-stodgy water utility into a high-flying film, music and pay TV conglomerate.

The six other officials charged in the case include Edgar Bronfman Jr. and former CFO Hannezo.

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