Vivendi Loses Appeal of 2010 Securities Fraud Verdict

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  • Company ordered to pay ADS holders about $50 million
  • Gamco loses appeal of ruling for Vivendi in separate case

Vivendi SA lost an appeal of a 2010 jury verdict that found the company acted recklessly, inflated the value of its shares and misled stockholders by hiding debt from a $77 billion acquisition spree in the 1990s that turned the company into a media giant.

A federal appeals court in Manhattan rejected Vivendi’s arguments that a judge overseeing the trial made errors that required it to throw out the verdict. The jury wasn’t asked to determine damages at the trial but a lawyer for the investors said they could recover as much as $9.3 billion that was lost when shares plummeted after Vivendi’s true financial condition became public.

That estimate was tossed aside later in 2010 when the U.S. Supreme Court ruled that federal securities laws don’t protect foreign investors who buy stocks of non-American companies on overseas exchanges. The only Vivendi investors eligible to recoup losses were those who held the company’s American depositary shares from October 2000 to August 2002. In 2014, a judgment of about $50 million was issued in favor of those investors.

“Vivendi strongly disagrees with the court of appeals’ decision affirming the judgment and continues to assert that it did nothing wrong,” the company said in an e-mailed statement. “Vivendi is analyzing its options, both in seeking further review before the court of appeals and in filing a petition for review with the Supreme Court of the United States.”

The case was one of only a handful of civil-securities fraud cases that have gone to trial since 1995. Most cases are either settled or dismissed before trial.

Gamco Ruling

The same three-judge panel of the appeals court also ruled in favor of Vivendi in a related case, agreeing with a lower court that dismissed claims by Gamco Investors Inc.

A Gamco spokesman had no comment on the ruling

Vivendi and its chairman, billionaire Vincent Bollore, are seeking to convince investors of the French conglomerate’s strategy of expanding beyond music, film and television to areas such as telecommunications and video games. Shares of Vivendi have declined 17 percent in the past year as the company has pursued targets such as game producer Gameloft SE, which it acquired through a hostile bid this year. 

The company has also accumulated a stake of more than 20 percent in larger game-maker Ubisoft Entertainment SA, and has told French authorities it’s seeking representation on the company’s board. Ubisoft is set to have an annual meeting Thursday, where Vivendi has a chance to make proposals.

The case is In Re Vivendi Universal SA Securities Litigation, 15-180, U.S. Court of Appeals, Second Circuit (Manhattan).

— With assistance by Alexandre Boksenbaum-Granier

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