Court halts Messier severance pay

By Bloomberg News, 9/25/2003

WASHINGTON -- The Securities and Exchange Commission won a court order blocking a $22.9 million severance payment to former Vivendi Universal SA chief executive Jean-Marie Messier, while the agency probes the world's number two media company.

US District Judge Kevin Duffy in New York yesterday barred Vivendi from transferring funds to Messier, ordering the company to put the payment in an escrow account. Earlier this month, a New York state judge ordered Paris-based Vivendi to comply with an arbitration panel's ruling and pay Messier the severance.

"Basically what we're trying to do is prevent this extraordinary payment from moving forward while we're in the midst of our investigation of Vivendi for the benefit of Vivendi shareholders," said SEC lawyer Gary Klein.

The Sarbanes-Oxley corporate governance law, enacted last year by the US Congress after scandals at Enron Corp. and WorldCom Inc., allows the SEC to ask a judge to place into escrow any "extraordinary payments" a company makes to one of its officers during the course of an agency probe. The aim is to deny executives any money made from corporate wrongdoing.

Vivendi said in a statement it "will continue to pursue its appeal" of the state court's order.

Messier's lawyer, Michael J. Malone, of King & Spalding in New York, did not immediately return a call seeking comment.

Duffy was originally scheduled to make a decision after a hearing on Sept. 29, when the SEC filed an emergency request with the judge Tuesday, alerting him that Messier had started trying to collect his money. "We were afraid that Messier could still get his money before the 29th," Klein said. "He had put Vivendi on notice that he was trying to get the money."

On Sept. 11, New York State Supreme Court Justice Marilyn Shafer upheld a June 27 decision by an arbitration panel which concluded that Vivendi owed Messier the 20.5 million-euro severance ($22.9 million).

The company vowed to appeal the ruling, while investors and French regulators sought to block the payment until a shareholder vote could be held on Messier's termination agreement.

Messier lost support from the Vivendi board a year ago after his plan to transform the former water utility into a rival to AOL Time Warner Inc. foundered. Messier spent $77 billion on acquisitions and was fired in July 2002 after his strategy led to a record loss and piled up debt. Vivendi said last November that the company's accounting is under investigation by the SEC and the US attorney's office in Manhattan. The SEC has regulatory jurisdiction because Vivendi's shares trade in the United States as American depositary receipts. The arbitration award is also the subject of litigation in France. Last month, Vivendi sued Messier and former chief operating officer Eric Licoys in Paris Commercial Court, seeking to force the two men to pay 23 million euros for allegedly signing their termination agreements in July 2002 without board authorization.In addition, a Paris civil court in July issued an order blocking the severance payment at the request of France's Commission des Operations de Bourse, the stock market regulator.

Vivendi shares yesterday rose 2.12 percent to 15.93 euros on the Paris stock exchange.