Vivendi Ex-Chief Held in Insider Trading Probe

From New York penthouse to Paris jail cell.

Jean-Marie Messier’s arrest for suspected insider trading and share price manipulation is a new low for the former boss of Vivendi Universal, who once made headlines with his jet-setting lifestyle.

Messier presented himself voluntarily at fraud police headquarters in Paris and was taken into custody Monday, almost two years after being ousted from the top job at the media and telecommunications group.

Authorities are probing a massive share buyback in which Vivendi allegedly spent more than $1.2 billion to prop up its own share price in the weeks after the Sept. 11, 2001, terror attacks. Messier and his top team are suspected of buying back Vivendi shares well above the authorized volumes even while the company was presenting its financial results -- a practice strictly forbidden by stock market rules.

Messier could remain in custody for up to 48 hours before a decision is made on whether to place him under formal investigation.

Didier Cornardeau, president of APPAC, a group representing small shareholders, welcomed the news, saying the former CEO “enriched himself at the expense of small shareholders.”

Messier’s detention is another stage in the long fall from grace of a man once revered as the embodiment of a new entrepreneurial culture and market savvy taking root in France.

After taking over in 1996 as CEO of water company Generale des Eaux, Messier set about transforming it into a multinational media and telecom group, acquiring the Universal film studios and music label in the United States, European pay TV station Canal Plus, a French publishing arm and the country’s No. 2 mobile operator.

The price of his acquisition spree became apparent in 2002, when Vivendi’s share price collapsed in a cash crisis during which Vivendi almost drowned in $42 billion of accumulated debt. Messier was sacked -- but not before he had negotiated a $25-million severance package.

Messier ultimately had to forfeit many of his perks, including the severance package to settle fraud charges brought by the U.S. Securities and Exchange Commission. Most recently, investigators have focused on whether Messier and his executive team made improper trades of company stock.

A report on the issue by France’s Financial Markets Authority was completed last year but has not been released.

According to a prosecution document, the watchdog group found that Messier and former Chief Financial Officer Guillaume Hannezo sold Vivendi shares or bought options to sell them just weeks before Vivendi’s financial situation began to unravel.

“At the end of 2001, Mr. Messier and Mr. Hannezo were in possession of negative information on Vivendi Universal’s financial situation, unknown to the public, of which some was likely to affect the share price,” the document reads, summarizing the AMF’s findings.

The AMF has acknowledged that its president, Michel Prada, wrote to Messier the following month to say he planned to take no action despite repeated breaches of market rules on share buybacks.

Police raided the AMF’s Paris offices March 30 this year as part of the widening probe.