Two of Hearts Broken

Don't tell former Vivendi Universal (NYSE: V  ) chief Jean-Marie Messier that the French government doesn't know how to play hardball. Yesterday, Messier surrendered to French authorities and spent the night in jail.

Messier, the two of hearts in the Shareholders Most Wanted, is notorious for trying to transform a staid, 150-year-old French water utility into a global media giant, reportedly vying to be France's answer to Time Warner's (NYSE: TWX  ) Ted Turner or News Corp.'s (NYSE: NWS  ) Rupert Murdoch. The effort ended with his resignation in July 2002, leaving Vivendi on the brink of bankruptcy.

But in many ways that was also the beginning. Shortly after Messier stepped down, the accounting investigations began, and they haven't stopped. Indeed, Messier's uncomfortable night behind bars is likely the middle of a very long road to resolution.

According to a BusinessWeek report, Messier is in custody but remains uncharged. At this point, he is only being held for questioning, and, naturally, denies any wrongdoing. Time will tell if he joins three former underlings, including ex-Chief Financial Officer Guillaume Hannezo, all of whom are under formal investigation by French regulators.

If the French government formally pursues Messier, he would face three principal charges: authorizing excessive share repurchases to disguise Vivendi's worsening financial condition; knowingly issuing false and/or misleading information to investors; and abusing company funds by making overly generous payments to Vivendi directors.

Although it's not the most serious charge, what's most disturbing to me is the shell game Messier authorized with share repurchases. Most of them, say French authorities, weren't conducted in public view, giving investors a false impression of Vivendi's growth. Even if French regulators choose not to focus on the share repurchases, Fools should. It may be the most insidious example to date of how share repurchases aren't always good.

Here in the U.S., Messier's mess has been resolved. A deal completed with the Securities and Exchange Commission last year forced Messier to pay $1 million in fines and forgo a $25 million severance package. French authorities may not be as kind. Were he to be formally charged and convicted, he could spend at least five years in a French stockade.

If that happens, don't be surprised if, like the parade of ex-cons who have preceded him, Messier reemerges touting a new book and earning $16,000 per speaking engagement.

Time Warner is a longtime recommendation of David Gardner's forMotley Fool Stock Advisorsubscribers. He and his brother Tom are slapping the market silly with their picks. You can get in on the action by giving it a try for six months, risk-free.

Fool contributor Tim Beyers thinks his Shareholders Most Wanted deck may be one of the best investments he's ever made. Tim owns no interest in any of the companies mentioned here, and you can view his Fool profile here.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 508616, ~/Articles/ArticleHandler.aspx, 10/26/2014 3:31:28 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement