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JUN
25
2 YEARS

Vivendi Suffers $956 Million Jury Award to Liberty Media

A jury agrees that Liberty was misled about Vivendi's financial health at the time of the USA Networks transaction.

John Malone Jean-Marie Messier - H 2012
Getty Images
Jean Malone, left, and Jean-Marie Messier

A jury has issued a verdict against Vivendi SA that could be worth a whopping $956 million for making misleading statements about its finances in 2001, when Liberty Media acquired shares in Vivendi in return for a big stake in USA Networks.

The lawsuit launched by Liberty, the media conglomerate led by John Malone, has been a lengthy one. When Liberty first filed a lawsuit in 2003, Vivendi issued a statement that it was "stunned" by the action. Nearly a decade later, Vivendi was rocked once again on Monday upon news of the verdict in the Liberty case.

At the turn of the century, under the leadership of then-CEO Jean-Marie Messier, Vivendi transformed itself into from a water conglomerate to a company with media and entertainment holdings, such as Universal Studios and Activision Blizzard.

But for years, Vivendi has been dealing with litigation from angry shareholders who have alleged the company misled investors about its financial health in the transformative period by underreporting cash shortages and making misstatements that inflated the company's stock price by as much as $11 per share. Messier resigned from Vivendi in 2002 as the company restructured in order to avoid bankruptcy.

In January 2010, Vivendi was hit with a jury verdict that was estimated to mean that Viacom would be liable for up to $9.3 billion in one of the largest securities class action awards ever. However, the verdict came under judicial review because much of the claims came from foreign investors who purchased foreign shares of Vivendi on foreign exchanges. Applying a recent Supreme Court ruling on whether such foreignness could be tolerated in U.S. courts, the judge dismissed the foreign claims in favor of the domestic ones. The case is still ongoing.

The Liberty lawsuit didn't have the same kinds of jurisdictional issues, but nevertheless took a great deal of time in the pre-trial phase before a weeks-long trial that started last month.

In agreeing to sell Vivendi control over USA Networks, Liberty got about 37 million Vivendi shares, or about a 3.5 percent stake of the company. At the time, the deal was valued at more than $10 billion, but by the time Liberty sold the shares in 2003, Vivendi's shares had slipped to about half of its original worth.

The jury found that Vivendi had breached contract and committed fraud.

Vivendi said in a statement that it "strongly disagrees with the decision" and "believes that there are many grounds for appeal."

Liberty said that it "very gratified by the jury verdict" and was "confident that the court will deny that request and that the jury's decision will stand."

E-mail: eriq.gardner@thr.com
Twitter: @eriqgardner