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.

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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.

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