Vivendi Sued By US Partner Over Tax Dispute

by Glen Shapiro, LawAndTax-News.com, New York

17 April 2003

Fresh controversy surrounding French-American media company, Vivendi, sprang up this week as USA Interactive chief, Barry Diller revealed that he is suing the firm for non-payment of a $620 million tax liability incurred by his company during the formation of their joint venture, Vivendi Universal Entertainment (VUE).

The creation of VUE combined Universal's film, television, and theme park properties with USA Interactive's cable channels and TV production company. According to Mr Diller, however, the latter company has become the victim of a 'hold up', as Vivendi has gone back on a promise to pay a tax bill which arose as a result of the merger.

'Vivendi's refusal to honour the clear commitment it made under the Messier (former Vivendi chairman, Jean-Marie Messier) regime is a classic case of buyer's remorse - an unjustified refusal to live up to obligations clearly and knowingly made,' the USA Interactive boss alleged.

According to the Hollywood mogul's suit, filed on Tuesday, Vivendi - which is currently trying to sell its Universal entertainment business - must make annual payments in order to repay its partner company for taxes which will become due on income received by USA Interactive from the preferred shares that it owns in VUE.

Mr Diller is also claiming that VUE should reimburse his company for taxes which become due if cable channels which it contributed to the venture are later sold by the partnership.

This follows recent press reports regarding another potential tax liability which has threatened the company's fortunes. These led Vivendi to announce earlier this month that it 'deplores the fact that the press draws attention unnecessarily to information that has been public knowledge for many years, and which has brought no new element to light and might cause major harm to the company.'

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