Vivendi's getting SUED!

[AyuRocks]

Suit claims Vivendi hid financial crisis to support deal
15 minutes ago

By ERIN McCLAM, Associated Press Writer

NEW YORK - Liberty Media Corp. sued European media giant Vivendi Universal SA, claiming Vivendi lied about a crippling financial crisis to prop up a $10.3 billion deal between the two companies.

The suit filed Friday seeks unspecified damages and asks a federal judge to nullify the 2001 deal, which gave Vivendi the entertainment assets of USA Networks Inc. in exchange for Vivendi stock and stock.

But Liberty Media claims Vivendi and its former chief, Jean-Marie Messier, used "fraud and misrepresentation" to hide its problems — including $19 billion in debt amassed under Messier's leadership.

The suit quoted a Messier statement from October 2001, two months before the USA Networks deal, in which the chief executive claimed the company could "outperform most of our peers" despite the economic downtown.

"Unfortunately, the financial situation at Vivendi was nothing close to the rosy situation that (the) defendants had portrayed it to be," said the suit, filed in Manhattan federal court.

Vivendi spokeswoman Anita Larsen said the company had no comment.

When the deal was completed Dec. 16, 2001, Paris-based Vivendi had hoped for increased exposure for its music and movies in the United States. Vivendi combined USA Network assets like the USA and Sci-Fi channels with its own Universal Studios, creating Vivendi Universal Entertainment.

Vivendi's American-traded shares were above $50 at the time of the deal. But they have fallen steadily since then, closing at $14.25 Friday on the New York Stock Exchange (news - web sites).

Shares of Liberty Media Corp. closed down 17 cents Friday at $9.79 on the New York Stock Exchange.

Earlier this month, Barry Diller stepped down as head of Vivendi Universal Entertainment, possibly paving the way for parent Vivendi to sell some of its assets for much-needed cash.


edited to add - think this might belong in the campaign forum?

Ashley

[saska]

This is interesting; could shake out badly for VUE. Or, it could shake out badly for Liberty Media if their suit is ruled to be opportunistic and false, in which case they might end up paying the legal expenses for VUE as well as themselves.

It will be a long time before this is resolved. (I have been a participant in a corporate lawsuit like this one, involving fraudulent claims by a purchasing company, and it took nearly three years to settle.) In my opinion, it has the potential to be a serious hindrance to our wish that Viacom purchase USA and the SciFi channel. If the assets are tied up in this lawsuit, they cannot be sold to another party until the whole matter is settled.

Thanks for posting, Ashley!

[waltersgirl]

well, shut my mouth

[JasonF]

If this keeps up we'll be able to buy [what's left of] Vivendi soon enough...

[grinner]

what, for 5 dollars apiece?

[LadyCrais]

Holy Dren! Now I am completely confused. There's been talk of Barry Diller with Liberty making a bid for Sci-Fi and USA, wasn't there? How involved with Liberty is Diller? Is this Diller's solution? Is this why Diller just stepped down? To force Vivendi to give the networks back and we're still left with Diller in charge of SciFi? Or is it just to give them leverage as one of the bidding parties to force the sale back to him, to settle out of court somehow?

Man-O-Man-O. This has the potential, if not probability, to be devastating news. :headbang:

[uisceboo]

I've been trying to tell people that Diller hasn't gone away. the lawsuit thing isn't new either, I think. Do we have any other legal advisors around here?

I think we should continue on as we were, in the hope that things may just be dismissed. If we wait until it all falls out, we will waste time for no substantiated reason. It's like the head start we got with this campaign...imagine what shape we would be in if we waited until the last ep aired to begin?

[Stargate2077]

Ick...this is bad...very bad. This lawsuit has the potential to drag out the sale of USA Networks. The court could rule to block any sale of USA Networks until the lawsuit is resolved. Why or why?

[Stargate2077]

LadyCrais: You are right that Diller was planning on using cash from Liberty Media to make a bid for USA Networks. So how much Diller was involved with this suit...I don't know. If he had anything to do with it...permission to mail this man to death?

[AyuRocks]

This paticular lawsuit was filed yesterday.

here's more -


Liberty Media Accuses Vivendi, Ex-CEO Messier of Fraud
Fri Mar 28, 7:37 PM ET

By Lingling Wei

NEW YORK -- Vivendi Universal SA and two former executives of the French conglomerate, including Jean-Marie Messier, are accused in a lawsuit of deceiving Liberty Media Corp. in a 2001 stock-exchange agreement between the two media companies.

The suit, filed by Liberty Media -- cable veteran John Malone's media investment company -- involves a December 2001 deal under which Liberty Media agreed to exchange a substantial part of its 21% stake in USA Networks Inc. for 37.6 million U.S.-traded shares of Vivendi. The suit was filed in U.S. District Court in Manhattan.

That transaction enabled Vivendi, the largest media concern in Europe, to gain control of the entertainment assets of Barry Diller's USA Networks. USA Networks is now known as USA Interactive .

The suit claims that at the time of the stock-swap agreement, Vivendi, Mr. Messier -- the company's former chief executive -- and former chief financial officer Guillaume Hannezo used "outright fraud, misrepresentation, and concealment" to hide its liquidity crisis from Liberty Media.

Vivendi's financial problems, exemplified by a heavy debt load and a lack of cash, began to emerge early last year. Its shares have since plummeted. As of Friday, Liberty Media said its investment has plunged to about $546 million, a more than 70% drop from the level when the deal was closed in May.

The company seeks both compensatory and punitive damages, as well as a rescinding of the stock-swap agreement and any damages as a result.

"Liberty Media relied upon the representations defendants made about Vivendi's financial status," the complaint says. "Had they known the truth, plaintiffs would not have acquired the Vivendi shares for the price paid."

At 4 p.m. EST on the New York Stock Exchange (news - web sites) (News - Websites), Vivendi's American depositary receipts fell 18 cents to $14.25. Its ADRs closed at $52.10 On the day the transaction was announced.

A representative for Vivendi couldn't be reached for comment late Friday.

Vivendi reported earlier this month the largest loss in French corporate history, due mainly to its write-down of the value of Universal Studios and its pay-television unit, Canal Plus SA.

CEO Jean-Rene Fourtou, who replaced Mr. Messier in July, has said the company may sell its entertainment business in the U.S. to get the its debt down. Liberty Media, meanwhile, has said it might buy a controlling stake in Vivendi's U.S. assets, which include Universal Studios and the USA and Sci-Fi cable- television networks.


OK.. to that last sentance.. CRAP. We'll just have to see how this turns out. Hopefully thats just a MIGHT.

:( Let's just hope Viacom beats them out.

Ashley

[Stargate2077]

The suit is for a deal Ex-CEO Messier made in 2001....

Does this suit have any merit now that Messier does not work for Vivendi Universal? Is Vivendi Universal liable for Messier's mistakes?

[AyuRocks]

Liberty Media Sues Vivendi Over USA Networks
Fri Mar 28, 7:21 PM ET

NEW YORK (Reuters) - Media conglomerate Liberty Media Corp. on Friday sued Vivendi Universal alleging Vivendi hid its financial crisis while negotiating a 2001 deal to exchange its own shares for most of Liberty Media's stake in USA Networks.

The securities fraud and breach of contract suit, filed in Manhattan federal court, is seeking unspecified punitive and compensatory damages and a court order voiding the deal.

A Vivendi spokeswoman declined comment on the suit.

Liberty Media, which is controlled by cable mogul John Malone, recently said it is boosting its acquisition war chest. It said it is considering a variety of transactions including buying Vivendi's U.S. entertainment assets.

Its suit alleges that in December 2001 Vivendi offered to buy a portion of Liberty Media's USA Network shares in exchange for American Depositary Shares that would represent Vivendi ordinary shares.

The deal, which was valued at about $10.3 billion at the time, provided Vivendi with a much-sought U.S. distribution outlet for its film and TV assets.

The exchange ratio proposed by Vivendi and agreed to by Liberty Media was based on the relative market prices of the Vivendi shares and the USA Network shares, the suit alleged.

It alleged, however, that Vivendi used "outright fraud, misrepresentation and concealment" to convince Liberty Mutual to go through with the deal.

Liberty alleged that Vivendi made public statements that it knew were false in order to inflate the value of the Vivendi shares during this critical measurement period.

When the parties had discussed the deal, Vivendi was aware that Liberty Media was interested in pursuing this arrangement partially because it believed that the Vivendi shares were a more liquid asset than the shares it held in USA Networks, the suit alleged.

The suit alleged that Vivendi was also aware that Liberty Mutual was relying on Vivendi's honest public reporting of its financial status in making its decision.

In December 2001 USA Networks shareholders unsuccessfully tried to block the transaction with lawsuits that alleged the deal was unfair.


So I guess they did try something of the sort before.

Ashley

[AyuRocks]

Stargate - hmm, I dunno. I can try to look something up, but maybe some here more familar with the law can fill us in. I just hope this whole case is dismissed.

Ashely

[AyuRocks]

bump

[LadyCrais]

In December 2001 USA Networks shareholders unsuccessfully tried to block the transaction with lawsuits that alleged the deal was unfair.

That is very interesting. It makes it sound like they brought suit once before and failed and are trying the same thing again. I didn't think they could do that unless they had new evidence. It also sounds like it has been a less than friendly relationship from the day one if they tried to back out of it right from the get-go.

At least this makes me a bit more hopeful. Knowing this has been looked at by the courts one time already and denied, it makes you think the suit could easily get thrown out of court this time. But we need our lawyers to check in because their opinions are going to be based on a heck of a lot more knowledge than I have about the law.

[grapeshot]

It seems to me that Vivendi is liable for any actions that Messier took, even though he's gone. This is just one more nasty shoal that Fourtou has to negotiate Vivendi through.

I'm not so sure that this would necessarily block any proposed sale of VUE assets. Vivendi is the entity that is liable for results of this lawsuit, but it seems to me that they can still handle their assets as they see fit, including selling them. It's possible that this will merely become one more negotiating point between Vivendi and Liberty Media. (i.e. sell to us, and we'll forget about this lawsuit.)

On the other hand, my pointy little head is heating up over all these events, and I'm pretty sure I don't know what I'm talking about. For example, exactly what are the chains of entities between The Sci-Fi Channel and Vivendi? With all the name changes I've lost track.

By the way, I think I remember reading something several months ago that a group of French investors are also suing Vivendi for a similar reason: misrepresenting their financial position when proposing to them that they would purchase Universal. The shareholders charge that because the company's financial position was vastly misrepresented, that therefore they were misled into voting in favor of the purchase.

edited to add this correction to the paragraph above
Nope, I was wrong. The French government is prosecuting Vivendi regarding misrepresentation of their financial state. Here's an abstract from a NYTimes article:
LEAD PARAGRAPH - French investigators searched the offices of Vivendi Universal and the home of its former chief executive, Jean-Marie Messier, today, as they pursued an inquiry about the company's accounting.

The search, conducted by the three investigating judges as well as French police, was part of an investigation begun by the Paris prosecutor's office in October. The issue is the accuracy of reports made to investors in 2000 and 2001, when Mr. Messier ran the company.

[saska]

It won't block the sale of assets unless the suit asks that the sale be blocked until it is resolved. We aren't privy to that information. The reason I am concerned is because USA Networks and SciFi by extension are specifically named according to the article.

When I went through this (not TV network obviously, different business type) we blocked the sale of our parent corporation to another corporation because we were attempting to exercise a "buyback" clause in our original sale to the parent corporation. That buyback clause was triggered based on their non-performance on certain key milestones. It took almost three years to resolve the suit, which ended in the favor of the remaining shareholders (I moved out of state and took a buyout for an agreed-upon price for my shares). Only after the whole thing was settled could they (the parent corporation) sell, because we refused to allow them to sell our business unit as a part of the corporation.

That just illustrates a lot of the nuances that could happen here. The plaintiffs could agree that the networks could be sold if they received a reparations payment as a part of the deal. That assumes, though, that they are more interested in the cash than the networks. Since they are suing to reclaim the networks, I would guess they really want the assets back, and not just the money.

Saska

[Tiriel]

Aha! Diller IS the Devil after all... how very sneaky... LOL! And here I was, thinking that corruption Dallas-style was all totally over the top!

In a movie-script I'd tell the writer to get lost... now what am I gonna do in real-life... Oh I know! Sue God for negligance in protecting us all from evil!!

Love and Peace and Yer Have GOT to Be Kiddin' Me!!!

Tiriel :bounce:

[saska]

Originally posted by Stargate2077
The suit is for a deal Ex-CEO Messier made in 2001....

Does this suit have any merit now that Messier does not work for Vivendi Universal? Is Vivendi Universal liable for Messier's mistakes?

Messier acted on behalf of the corporation. In rare cases corporations can sue their former officers for criminal misconduct, but that only provides them with financial reparation and VERY rarely results in any leniency toward the corporation for its actions while the ex-officer was in power.

Part of the reason for forming a corporation is to create a legal entity with responsibility, separate from the individuals who run it. Again going back to my own experience, we first attempted to sue the CEO of our parent company because it was his personal conduct that (a) gave us the exit clause and (b) resulted in the missed milestones. However, we were blocked from doing this because the CEO is not personally liable when acting as an officer of the corporation.

In our case, after the entire suit was settled, our former parent corporation sued the former CEO for criminal misconduct. We saw no benefit from that, though, and the corporation was the only entity that could revoke his protection and hold him responsible.

Saska (these are bad memories we're dredging up here)

[grapeshot]

Aha! Diller IS the Devil after all... how very sneaky... LOL! And here I was, thinking that corruption Dallas-style was all totally over the top!


Oooh la la, my dear, that ain't nuttin'! You should read the saga of what happened between Diller and Davis (not to mention Rupert Murdoch) back in the days when the Fox network was first being formed. Or the way Mr. Diller was outmanuevered by Mr. Karmazin when Viacom obtained Paramount. As MediaSavant observed in another post somewhere, this industry is fascinating to observe.

[AyuRocks]

Vivendi Says Liberty Suit Without Merit
Sun Mar 30, 1:40 PM ET

NEW YORK (Reuters) - Vivendi Universal on Sunday described a lawsuit from Liberty Media Corp. as "without merit" and said it saw the litigation as an effort to gain leverage in negotiations between the companies.

French conglomerate Vivendi said the lawsuit filed on Friday by Liberty, which is controlled by media mogul John Malone, came a day after Vivendi conducted a business meeting through its bankers with Liberty's chief executive.

Vivendi, which said it would vigorously defend the lawsuit, said it believed Liberty's chief motive in filing the suit was to gain leverage in ongoing negotiations about future collaborations between the companies.

Liberty, which has publicly said it was interested in buying Vivendi assets, alleged in the lawsuit that Vivendi hid its financial crisis while it negotiated a 2001 deal to exchange its shares for Liberty's stake in USA Networks.


grapeshot - that's my big worry, that they'll try to get the Universal assets as a settlement.

Here's Vivendi's official press release -



Press Release Source: Vivendi Universal

Vivendi Universal Calls Liberty Media Corporation's Lawsuit 'Without Merit'
Sunday March 30, 12:28 pm ET

PARIS--(BUSINESS WIRE)--March 30, 2003--In response to Liberty Media Corporation's lawsuit against Vivendi Universal (Paris Bourse: EX FP; NYSE: V) and its subsidiary, Universal Studios, Inc., which was filed in federal district court in New York City on Friday, March 28, 2003, the company stated the following:
"Vivendi Universal intends to vigorously defend this lawsuit, which it believes to be without merit. The company was surprised and was particularly stunned by this legal action, because the complaint was filed without notice, just one day after Vivendi Universal, through its bankers, and Liberty Media CEO had conducted a business meeting regarding their future collaborations, after several such meetings and exchange of documents.

"Vivendi Universal believes that Liberty's chief motive was to file the lawsuit in order to gain leverage in those ongoing negotiations.

"Vivendi Universal added that the lawsuit would not distract the company from the quick and orderly resolution of its financial issues. Vivendi Universal remains on track to return to an investment grade credit profile within the next 12 to 18 months by continuing to reduce the company's leverage while maintaining sufficient liquidity."

Important Disclaimer:

This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside our control, including but not limited to the risk that the reduction of Vivendi Universal's indebtedness expected to be reached as a result of the debt-reduction plan, proposed disposals and/or restructurings will not materialize in the timing or manner described above; that Vivendi Universal will not be able to obtain the necessary approvals to finalize certain transactions; that Vivendi Universal will be unable to further identify, develop and achieve success for new products, services and technologies; that Vivendi Universal will face increased competition and that the effect on pricing, spending, third-party relationships and revenues of such competition will limit or reduce Vivendi Universal's revenue and/or income; that Vivendi Universal will be unable to establish and maintain relationships with commerce, advertising, marketing, technology, and content providers; and that Vivendi Universal will not be able to obtain or retain, upon acceptable terms, the licenses and permits necessary to operate and expand its businesses; as well as the risks described in the documents Vivendi Universal has filed with the U.S. Securities and Exchange Commission and the French Commission des Operations de Bourse, including Vivendi Universal's report on Form 6-K filed with the Securities and Exchange Commission on March 28, 2003. Investors and security holders are urged to read those documents at the Commission's website at www.sec.gov. Those documents may also be obtained free of charge from Vivendi Universal. Vivendi Universal does not undertake nor does it have any obligation to provide updates or to revise any forward-looking statements.



Ashley

[AyuRocks]

More -


Liberty launches lawsuit over VU stock-swap deal

By Nicole Sperling and Georg Szalai

LOS ANGELES (The Hollywood Reporter) --- Liberty Media Corp., the media investment company controlled by billionaire John Malone, filed a lawsuit charging Vivendi Universal with misrepresenting its financial situation in the run-up to the deal that created Vivendi Universal Entertainment, to which Liberty and Barry Diller were parties. The lawsuit comes at a time when Liberty is in talks with Vivendi over a potential takeover of the French conglomerate's U.S. entertainment assets.

The lawsuit in a federal district court in Manhattan seeks unspecified damages and a nullification of the 2001 deal, which gave Vivendi control of the entertainment assets of USA Networks in exchange for stock and cash. As part of the transaction, Liberty -- as a USA shareholder -- exchanged its stake in USA and a European television production company for a 3.6% stake in Vivendi. Liberty now claims Vivendi and its ousted CEO Jean-Marie Messier used "fraud and misrepresentation" to hide financial problems, such as a high debt load and a tight cash position, which surfaced last summer when Jean-Rene Fourtou took over for Messier. The suit names former Vivendi CFO Guillaume Hannezo as a co-defendent.

Vivendi shares have lost more than two-thirds of their value since the VUE deal was announced. Also, government agencies have been investigating the company's financial reporting, requesting as recently as March 18 additional documents relating to the accounting probe. The company's American depository receipts fell 0.18 on Friday to 14.25. On the day the transaction took place, the Paris-based company's shares closed at 52.10.

"The financial situation at Vivendi was nothing close to the rosy situation that defendants had portrayed it to be," Liberty says in its complaint. "Liberty Media relied upon the representations defendants made about Vivendi's financial status. Had they known the truth, plaintiffs would not have acquired the Vivendi shares for the price paid."

In a statement released Sunday, Vivendi said it would "vigorously defend" the Liberty lawsuit, calling it "without merit." Vivendi also said it was "surprised and was particularly stunned by this legal action, because the complaint was filed without notice, just one day after Vivendi Universal, through its bankers, and the Liberty Media CEO had conducted a business meeting regarding their future collaborations, after several such meetings and exchange of documents."

The lawsuit came just days after Liberty CEO Robert Bennett said the two companies were in "ongoing" conversations about the future of Vivendi's entertainment assets, including the Universal film studio and the USA and Sci Fi Channel cable networks, which it has been looking to sell (HR 3/25). Some industry observers expect that Diller could join a Liberty bid after his recent resignation from all VUE functions. Diller and Malone have worked together before, and Liberty is a major shareholder in Diller's USA Interactive, which owns a 5% stake in VUE.

Also, Liberty a few days ago indicated it would focus more on content acquisitions by backing a bid by Rupert Murdoch's News Corp. for satcaster DirecTV. Originally, Liberty considered placing its own bid. In its statement Sunday, Vivendi said it "believes that Liberty's chief motive was to file the lawsuit in order to gain leverage" in their ongoing acquisition negotiations.

Liberty officials could not be reached for comment.

Liberty shares fell 0.17 on Friday to close at 9.79.


Ashley

[Dominar of Action]

"Vivendi, which said it would vigorously defend the lawsuit, said it believed Liberty's chief motive in filing the suit was to gain leverage in ongoing negotiations about future collaborations between the companies." Well, duh! Ya think?! I hope the fact that Liberty has resorted to blackmail means things weren't going too well for them in the negotiations. If not, then I certainly can't see things going too well for them in the future (unless there's an injunction granted that blocks the sale of the assets to someone else).Vivendi Universal added that the lawsuit would not distract the company from the quick and orderly resolution of its financial issues. Vivendi Universal remains on track to return to an investment grade credit profile within the next 12 to 18 months by continuing to reduce the company's leverage while maintaining sufficient liquidity.You go, Fourtou!

[Digger]

I haven't seen this posted yet. If true this could be a bad thing.

CBS.MarketWatch.com
Last Update: 10:43 AM ET March 28, 2003

LOS ANGELES (CBS.MW) -- Vivendi Chairman Jean-Rene Fourtou reassured 300 Universal Studio executives he does not plan to break up the company's film and television assets, according to one Universal executive.

In a question-and-answer session on Universal's Los Angeles lot on Thursday, Fourtou told employees he is looking to sell or spin off the theme park, moviemaking and television operations but plans to keep them together regardless of who the buyer is, according to the executive, who was at the meeting and declined to be identified.

The meeting came as Universal executives wonder about their futures after Vivendi Universal's (V: news, chart) U.S. entertainment assets are separated from the rest of the Paris-based company.

The assets were purchased in 2000 under then-Chairman Jean-Marie Messier, who was ousted last year. He is blamed for heaping a mountain of debt on Vivendi through a series of purchases, nearly casting it into bankruptcy.

There is no assurance that Universal management would stay in place, but it is considered one of the top teams in the industry. In the last three years, Universal's films have consistently been profitable. Included are a series of $100 million films such as "The Bourne Identity," "Jurassic Park III" and "A Beautiful Mind," which won the best picture Oscar for 2001.

Universal's specialty label, Focus Features, created an upset of sorts at this year's Oscars when "The Pianist" captured surprise honors for best actor Adrien Brody and best director Roman Polanski.

A strategy to keep Universal's film and TV assets together would exclude Viacom (VIA: news, chart) (VIA.B: news, chart) because officials there have said they're interested only in Universal's TV assets. (Editors' note: Viacom is a significant investor in MarketWatch.com, publisher of this report.)

There are several other suitors, though none have initiated the due diligence process, according to the Universal executive. Los Angeles oil billionaire Marvin Davis, General Electric's (GE: news, chart) NBC and Metro-Goldwyn-Mayer (MGM: news, chart) have been mentioned as possible suitors.

Another could be Barry Diller, who oversaw Vivendi's entertainment assets and was said to be interested in acquiring a controlling stake. Diller recently resigned his post with Vivendi to concentrate on his post as chief of USA Interactive (USAI: news, chart) .

[VBKatLou]

Hey, when you guys post these articles, can you be sure to include the date/time? I think the one Digger just posted is a week or so old.

I'm not part of the TV industry and trying to figure out who's done what to who and when is making me dizzy (Kat opens another bite-size Mr. Goodbar) :rollin:

[Digger]

Just updated my post VBKatLou. The article was from March 28th.

[VBKatLou]

Thanks sweetie :)

[Digger]

My Pleasure.