Bronfman May Face Insider Trading Charges

Warner Music Group chief Edgar Bronfman Jr. could face charges of insider trading relating to his time as executive vice chairman of French media and telecom group Vivendi.

Thierry Marembert, Bronfman’s lawyer, says his client "has cooperated fully with French inquiries into Vivendi Universal share transactions," a probe ongoing since 2002.

"Mr. Bronfman’s transactions have at all times been proper and at no time did he contravene any French laws or regulations," Marembert said in a written statement.

Bronfman is suspected of insider trading in connection with a sale of Vivendi shares in January 2000, and reportedly was notified of the preliminary charges against him at the beginning of this year.

Under French law, preliminary charges mean an investigating judge has determined there is strong evidence to suggest involvement in a crime. The filing gives magistrates time to pursue an investigation that can result in a trial or in the charges being dropped.

Bronfman was chief exec of Seagram Co. when it merged with Vivendi in 2000, and he served as executive vice chairman of the merged business until he resigned in March 2002. He remained with the company as a consultant and vice chairman of its board after his resignation.

Former Vivendi chairman Jean-Marie Messier is also facing further preliminary charges, although a whole raft of the companies’ former execs have come under scrutiny during the course of the last six years.

Messier transformed Vivendi into one of the world’s largest media conglomerates with a late-’90s acquisition spree, but it left the company with huge debts and triggered a financial crisis that cost him his job.

The probe began in 2002 when shareholders filed a complaint alleging Messier and Vivendi had deliberately misled investors into buying or holding the company’s stock.

Former Vivendi chief exec Jean-Rene Fourtou was cleared of insider trading in 2006 and Jean-Bernard Lévy, who succeeded him as chief exec in 2005 and still holds the post, was believed to have benefited from insider information when investing about euro 20 million (then US$25 million) in the telecommunications and media group’s November 2002 bonds issue. But the Autorité Des Marchés Financiers (AMF), which regulates the French stock market, decided that they didn’t break any rules.

In the two and a half years after he was forced out of Vivendi, Messier had had to go to court in Paris and New York to hang on to his estimated euro 20.5 million payoff and has been fined more than a couple million dollars by U.S. and French courts for publishing "inaccurate" and "abusively optimistic" information concerning Universal’s financial status.

His time in charge had resulted in the company plunging into debt to the tune of euro 35 billion, while he was coming under investigation for alleged stock market manipulation, false accounting and fraud.

He was forced to resign in July 2002 when the board discovered the company was on the brink of a cash crisis, triggered in part by billions of dollars of secret stock repurchases that had been designed to prop up Vivendi’s share price.

The company held a fire sale to raise cash but hung on to the ownership of Universal Music Group, the world’s biggest music company, and Vivendi Games. It also holds majority stakes in telecom operators SFR and Maroc Telecom, and pay-TV broadcaster Canal Plus SA.

The country’s major newspapers considered Messier’s departure as the end of one of the most embarrassing chapters in French corporate history.