Vivendi Is Target of Formal SEC Probe

Vivendi Universal disclosed Tuesday that U.S. regulators were ratcheting up their investigation of the company.

The French media giant said the Securities and Exchange Commission’s preliminary inquiry had evolved into a formal investigation.

The widely expected development gives the agency authority to subpoena financial records and former Vivendi officers for testimony.

Vivendi said it would cooperate fully with the investigation, which is being coordinated with a criminal probe by the U.S. attorney’s office in New York.

French prosecutors also have launched an investigation of whether the company published false information in the last two years to conceal its cash crisis from investors.

The investigations center on the issue of whether Vivendi under then-Chief Executive Jean-Marie Messier misled investors about a financial crisis in the company this summer.

Messier was ousted after Vivendi spent $77 billion over three years to transform a water utility into a giant media company with assets that include Universal’s movie studio, theme parks and leading music labels.

Among other issues, authorities are investigating allegations that Messier misled investors by issuing a statement June 26 denying that Vivendi faced liquidity problems, sources familiar with the investigations said.

One week later, Messier was ousted and new CEO Jean-Rene Fourtou declared that Vivendi was on the verge of defaulting on its bank loans.

U.S. authorities also are expected to focus on a series of stock transactions Messier reportedly made to bolster Vivendi’s lagging share price without consulting Vivendi’s board of directors and former Chief Financial Officer Guillaume Hannezo, sources said.

Messier has denied any wrongdoing.