) chief executive had been taken into police custody. They're seeking legal redress for the most spectacular corporate meltdown in French history. "Small shareholders can have confidence in French justice," Didier Cornardeau, president of the shareholders' group APPAC, declared in a radio interview.
The celebration is premature, however. For one thing, Messier hasn't been charged with anything, and legal experts say he will almost certainly not be charged while in custody. He surrendered voluntarily and is being held for up to 48 hours for questioning. Authorities say the interrogation will focus on a $2 billion share buyback by Vivendi in 2001, one of several elements in an ongoing criminal probe of the company and its former executives by French investigating magistrates.
Messier, a flamboyant dealmaker who ran up huge debts trying to transform Vivendi from a utility company into a global media conglomerate, was forced to resign in July, 2002, when Vivendi was on the verge of bankruptcy.
COMFORTING FACT. Messier's lawyer, Olivier Metzner, calls the interrogation "a normal step" in the investigation and says Messier had been eager to talk with authorities. The former CEO wants "to be able to explain himself and to better defend his former colleagues," Metzner said in a statement after Messier turned himself in. Three lower-level former Vivendi execs, including former Chief Financial Officer Guillaume Hannezo, have already been placed under formal investigation - a step that goes beyond the questioning that Messier now faces.
Messier can take comfort in knowing that the share buyback - in which Vivendi bought 21 million of its own shares - may be the weakest element of a potential criminal case against him. The transactions took place between Sept. 17 and Oct. 2, 2001, when financial markets were reeling after the September 11 attacks. Shareholder groups have complained that the buyback, which was not disclosed publicly at the time, propped up Vivendi's share price and thus helped conceal the company's deepening financial woes.
Ordinarily, French stock-market rules would have barred Vivendi from trading large blocks of shares during this period, because the company was about to issue quarterly financial figures. But France's stock-market regulator, the Autorité des Marchés Financiers (AMF), has confirmed that its then-President Michel Prada sent Messier a letter in October, 2001, saying his agency would take no action against Vivendi in light of the unusual market conditions. "The [investigating magistrates] are not very realistic in pursuing [Messier] for this," says a top Paris lawyer specializing in white-collar crime.
SLOWLY MOVING. A potentially more serious aspect of the case involves allegations that Messier and his management team repeatedly lied to investors about Vivendi's financial condition. That was the core of a U.S. Securities & Exchange Commission complaint against Messier and Hannezo, which was settled last December with an agreement under which Messier paid a $1 million civil penalty and was required to forego a $25 million severance package that he had negotiated with Vivendi.
Hannezo was fined $120,000. Among other things, the SEC found that Messier and other executives had falsely described Vivendi's cash flow as "excellent," inflated the company's operating profits, and failed to disclose financial commitments by some Vivendi subsidiaries that, if known to investors and ratings agencies, would have raised doubts about the company's situation.
If Messier were convicted of similar charges in France, he could be fined or face a prison sentence of about a year. However, fines imposed by French courts in white-collar cases are typically much lower than those imposed in the U.S. And French courts are notoriously slow in considering these complicated affairs. Legal proceedings in a corruption case involving former state-owned oil company Elf Aquitaine have dragged on for a decade. It's possible French shareholder groups may have a long wait for justice. Matlack is a correspondent in BusinessWeek's Paris bureau