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Vivendi Reaches Settlement Deal With SEC

by Glen Shapiro,

30 December 2003

Observers have suggested that although Vivendi Universal's decision to settle with the US Securities and Exchange Commission (SEC) over claims that the company issued false statements, made improper adjustments to earnings, and failed to properly disclose its financial commitments, is unlikely to represent the end of Vivendi's legal woes, it does represent a significant step forward.

In a statement released on December 23rd, the SEC announced that it had filed and simultaneously settled a civil fraud action against Vivendi Universal, SA (Vivendi), its former CEO, Jean-Marie Messier (Messier), and its former CFO, Guillaume Hannezo (Hannezo).

The settlements included Vivendi's consent to pay a $50 million civil money penalty, Messier's agreement to relinquish his claims to a EUR21 million severance package that he negotiated just before he resigned his positions at Vivendi, and payment of disgorgement and civil penalties by Messier and Hannezo that total over $1 million.

The Commission revealed its intention to direct that disgorgement and penalties paid in this case be paid to defrauded investors, including those who held Vivendi's ordinary shares and its American Depository Shares during the time period alleged in the Commission's complaint, pursuant to Section 308(a), the Fair Funds provision of the Sarbanes-Oxley Act of 2002.

Linda Thomsen, Deputy Director of the Commission's Division of Enforcement, observed that:

"This case shows the Commission's ongoing commitment to enforcing the disclosure obligations of issuers and it shows our successful use of a new enforcement tool provided by the Sarbanes-Oxley Act."

The firm now faces a class action in the United States and possible penalties from France's market authorities. An investigation into Vivendi Universal conducted by the Paris public prosecutor is ongoing.

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