SEC Moves to Block Messier’s Severance Pay

The Securities and Exchange Commission on Tuesday asked a federal judge in New York to block a $23-million severance and bonus payment to Jean-Marie Messier, the former chairman of Vivendi Universal.

The unusual action by the SEC, which is investigating Vivendi and its former officers for possible violations of U.S. securities laws, came one day after a New York state Supreme Court judge ordered Vivendi to pay Messier the money. The judge was upholding an earlier arbitration panel’s ruling that Vivendi was obligated to pay Messier under a “termination agreement” negotiated shortly before his ouster last summer.

The SEC’s request signaled a potentially significant setback for Messier, who is fighting to salvage not only his severance and bonus pay but also his reputation.

“The SEC is not likely to take such a step if it does not believe that it has compelling evidence of possible wrongdoing on the part of Messier,” said Jacob Frenkel, a former SEC enforcement lawyer and former federal prosecutor.

Messier, who has previously denied any wrongdoing, could not be reached for comment Tuesday.

David Nelson, director of the SEC’s regional office in Miami, said the agency wanted to “exercise the powers that we have under federal laws that we think most benefit investors.”

The action marks only the second time the SEC has invoked the Sarbanes-Oxley law to block severance pay. The law gives the agency the authority to seek court orders temporarily freezing for as long as 90 days any “extraordinary payments” a company makes to one of its officers during the course of an SEC investigation.

In May, the agency successfully blocked nearly $38 million in severance payments to former top executives of Gemstar-TV Guide International Inc. -- former Chief Executive Henry Yuen and former Chief Financial Officer Elsie Leung.

In its application with the federal court, the SEC said that if it “establishes that Messier is liable for violations of federal securities laws, the court could order disgorgement of his ill-gotten gains.”

The SEC investigation, which has been coordinated with a criminal probe by the U.S. attorney’s office in New York, began in November and was expected to be completed in the next three months. The commission’s staff has interviewed numerous witness and gathered more than 200,000 pages of documents, according to the SEC’s request.

French stock market regulators recently completed an 81-page report on Vivendi’s accounts. They found no evidence that the company committed accounting fraud, but they raised questions about whether Messier and other former officers painted an overly rosy picture of Vivendi’s financial health in the months leading up to his ouster.

French and U.S. authorities also have scrutinized whether Messier and former Chief Financial Officer Guillaume Hannezo attempted to hide Vivendi’s financial crisis from shareholders and violated insider trading rules by unloading Vivendi stock shortly before the company conducted a large sale of shares.