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statement and prospectus dated October 30, 2000 issued in connection with the three-way merger 

(the “Merger”) of Vivendi, SA., The Seagram Company Limited (“Seagram”) and Canal Plus, SA. 

(“Canal Plus”) that created Vivendi Universal, S.A. Plaintiffs seek damages pursuant to the 

Securities Act of 1933 (the “Securities Act”), the Securities Exchange Act of 1934 (the “Exchange 

Act’), and state common law claims for fraud and deceit and negligent misrepresentation. 

2. Vivendi started as a small French-based water utility. Defendant Messier, however, 

caused Vivendi to pursue a $77 billion acquisition program that changed Vivendi into a giant global 

conglomerate. Most significantly, as a result of its three-way, $46 billion Merger with Seagram (the 

parent of Universal Studios and Universal Music) and Canal Plus (one of Europe’s largest cable TV 

operators) in October 2000, Vivendi immediately became one of the world’s largest media and 

entertainment companies. Subsequently, Vivendi’s “Media and Communications” operations and its 

“Environmental Services” operations (which include its water utility subsidiaries) constituted the 

two core areas of the Company’s business. 

3. In the period leading up to the October 2000 Merger and through August 14, 2002, 

Defendants reported strong revenue and earnings, and portrayed Vivendi as a company that was 

generating sufficient cash flow to satisfy its debt obligations on approximately $21 billion in debt 

that it had amassed in connection with financing its $77 billion acquisitions-- even though other 

media and communications companies in the United States and Europe were suffering through a 

period of retrenchment and contraction. As a result of Defendants’ repeated upbeat earnings 

announcements and assurances concerning the Company’s growth and its ability to meet its massive 

debt obligations, the price of Vivendi’s ordinary shares and ADSs were artificially inflated. 

4. However, as Defendants knew but did not disclose, Vivendi’s operations and 

financial condition were dramatically worse than what their public statements portrayed. For 

example, Vivendi (using its increasingly inflated common stock as currency to finance many of its 

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acquisitions) bid aggressively for several large companies, with the result that Vivendi substantially 

overpaid for them. Moreover, subsequent events (unbeknownst to investors including Plaintiffs) 

confirmed that these acquired entities could not generate sufficient cash flow to justify their high 

acquisition cost, with the result that Vivendi’s balance sheet was bloated with tens of billions of 

dollars of inflated “goodwill” whose value had been materially impaired and should have been 

written down. The failure of the Vivendi conglomerate to generate earnings in line with its publiclytouted estimates further threatened the Company’s liquidity, given that the Company needed to 

generate massive amounts of cash flow from operations to satisfy its obligations on over $21 billion 

worth of debt. 

5. To conceal the deteriorating state of Vivendi’s corporate conglomerate, Vivendi 

engaged in a variety of improper asset- and revenue-inflating practices that enabled the Company to 

artificially inflate its reported assets, revenue, income and earnings per share (“EPS”) at the end of 

the Company’s quarterly reporting periods, rendering Vivendi’s publicly filed financial statements 

and other communications regarding the Company’s financial performance complained of herein 

materially false and misleading. 

6. Vivendi’s improper accounting (as set forth at ¶¶ 124-193) included, inter alia, failing 

to take timely write-offs of over €29 billion in goodwill associated with Vivendi’s acquisitions, 

including its acquisitions of U.S. Filter and Canal Plus. Defendants’ failure, in violation of U.S. 

Generally Accepted Accounting Principles (“U.S. GAAP), to take timely write-offs of impaired 

goodwill caused Vivendi to improperly delay recognizing offsetting charges of over €29 billion 

against the Company’s earnings, with the result that Vivendi’s reported earnings were inflated under 

U.S. GAAP by tens of billions of dollars between 2000 and 2002. 

7. In addition to its failure to properly account for impaired goodwill, Vivendi also 

engaged in a variety of improper revenue recognition and expense deflating practices, and other 

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related misconduct, to inflate its reported financial performance. These practices included, inter alia, 

(a) reporting and consolidating into its own financial statements billions of dollars of revenue from 

entities in which Vivendi held only a minority stake and which Vivendi did not control (such as 

Cegetel and Maroc Telecom), in violation of U.S. GAAP (as detailed below at ¶¶ 153-173); and (b) 

recognizing 100% of the revenue “upfront” (i.e., in contract year one) on billions of dollars of multiyear contracts in a practice known as “booking backlog,” even though Vivendi had not yet 

performed its obligations under those multi-year contracts and U.S. GAAP required that the revenue 

on such contracts be recognized ratably over time as Vivendi actually performed the contracted-for 

services (as detailed below at ¶¶ 174-185). 

8. The foregoing improper accounting practices not only allowed Vivendi to keep its 

stock price artificially high, but also facilitated Defendants’ fraudulent efforts to conceal the 

Company’s burgeoning liquidity problems. For example, on December 6, 2001, defendant Messier 

assured the investing public that “Vivendi Universal is in a very strong position, with solid 

performance in virtually every business.” A week later -- after having announced that it would raise 

$2.5 billion by selling a $1.5 billion interest in British Sky Broadcasting Plc (“BSkyB”) and a $1.06 

billion interest in Vivendi Environnement -- Vivendi stated that these asset sales would give Vivendi 

“room to manoeuvre” for additional acquisitions, and enable it “to cover any eventual needs from 

different opportunities for strategic partnerships.” On December 17, 2001, Vivendi then announced 

that it would be acquiring USA Networks for approximately $10 billion. 

9. Unbeknownst to investors including Plaintiffs, however, Vivendi’s business at that 

time was anything but “strong” and lacked “room for manoeuvre.” To the contrary, as the Wall 

Street Journal later reported in October 2002, the Company had faced a potentially catastrophic 

liquidity crisis: 

On Dec. 13 last year [2001], [Defendant] Hannezo sent [Defendant] 

Messier, [Vivendi’s] chairman . . . a desperate handwritten plea. 

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“I’ve got the unpleasant feeling of being in a car whose driver is 

accelerating in the turns and that I’m in the death seat,” wrote Mr. 

Hannezo, the company’s chief financial officer. “All I ask is that all of 

this not end in shame” 

That very day, unknown to investors and the Vivendi board, the 

company had narrowly averted a downgrade by credit-rating agencies, 

which would have made it difficult to borrow money and plunged the 

company into a cash crisis. Mr. Hannezo ... implored his boss and 

longtime friend [Defendant Messier] to take serious steps to reduce 

Vivendi’s ballooning debt. 

When [Vivendi’s] board met the next day to consider whether to 

approve a roughly $10 billion acquisition of USA Network Inc.’s TV 

and film businesses, Mr. Messier made no mention of the close call 

with the rating agencies. Instead, when a director asked about 

Vivendi’s financial profile, Mr. Messier said the company had no 

problem, according to two directors who were there. 

The board endorsed the USA Networks deal.... But Vivendi was 

already in dire financial straits . . . . (Emphasis supplied) 

“How Messier Kept Cash Crisis at Vivendi Hidden For Months; Media Giant Was At Risk Well 

Before Investors Knew,” The Wall Street Journal, October 31, 2002, at A1. 

10. Without publicly disclosing the adverse material facts facing the Company -- and 

while affirmatively and materially misrepresenting the truth concerning the Company’s actual 

prospects, financial performance, improper accounting practices and liquidity situation -- Defendant 

Messier took advantage of the market’s ignorance of the truth by causing Vivendi to purchase 

numerous companies using artificially inflated Vivendi stock as currency. By maintaining an 

artificially inflated price for Vivendi’s common stock, Defendants were able, in essence, to purchase 

tens of billions of dollars worth of Seagram’s, Canal Plus and other entities’ stock at a “discount,” 

since Vivendi was paying using a currency (Vivendi’s own stock) that was in reality worth only a 

fraction of its publicly-traded price. 

11. Defendants’ motive to commit fraud and to inflate the price of Vivendi shares was 

further increased as a result of Defendant Messier’s unilateral and secret decision to spend billions of 

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dollars during 2001 to buy back approximately 104 million shares of Vivendi stock (or nearly 10% of 

the Company’s equity). Defendant Messier had Vivendi sell put options on Vivendi shares in late 

2000 and 2001, making a large bet on the Company’s behalf that Vivendi shares would rise. These 

put options obligated Vivendi to buy back tens of millions of its shares at fixed prices in the future, 

so that, if Vivendi’s share price were to fall, the Company could lose as much as $1.4 billion. In the 

end, Defendant Messier’s massive stock buy back scheme, though intended to help boost Vivendi’s 

share price and thereby further facilitate still more corporate acquisitions and reduce its put option 

exposure, increased Vivendi’s already massive debt by additional billions. As Vivendi’s stock price 

continued to fall, causing the value of Vivendi’s treasury stock and put option positions to further 

decline, the pressure only increased for Defendants to continue their fraud to “make up” for these 

further losses. 

12. Although Defendants embarked on their fraudulent scheme to conceal the 

Company’s financial problems no later than October 30, 2000, the market – and Plaintiffs – did not 

begin to learn of the extent of Vivendi’s severely weakened financial condition and deteriorated 

value until July 2, 2002. On that date, a credit rating agency downgrade of Vivendi’s debt, according 

to one published report, “sparked near-panic selling in Paris that caused Vivendi shares to plunge 

25% for the day, to a new IS-year trading low of €17.8.” The same credit agency report also 

disclosed that Vivendi’s financial obligations in 2002 could be as much as $3 billion more than -- or 

approximately twice as large as -- what most analysts had expected. The situation was so dire that, 

although unbeknownst to the public at the time, Goldman Sachs had privately presented several 

scenarios for Vivendi’s future to a group of Vivendi board members on June 24, 2002 -- and one of 

those scenarios showed Vivendi going bankrupt in as little as just three or four months (i.e., in 

September or October of 2002). 

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13. On July 3, 2002, the board forced Defendant Messier to resign. The board obtained 

defendant Hannezo’s resignation a few days later. Messier, however, stubbornly refused to admit 

any wrongdoing, stating on the day he was forced out that there were “no underestimated liabilities” 

and “no overvalued assets” on Vivendi’s financial statements, and that the Company’s previously 

reported financial results were all “true, genuine and complete.” However, the complete story had 

yet to be told. 

14. On August 14, 2002, Vivendi reported that it had suffered a huge loss of 

approximately $12 billion for the first half of 2002, and that it would have to sell approximately $10 

billion in assets in an effort to reduce its debt. Vivendi’s new chairman, Mr. Jean-Rene Fourtou, also 

admitted that “[w]e are facing a liquidity problem.” That same day, Standard & Poor’s further cut its 

ratings on Vivendi’s long-term corporate debt to junk status. In response, the price of Vivendi’s 

ordinary shares plunged nearly another 25% on August 14, to as low as €11.89. 

15. In the wake of these disclosures, formal investigations into Vivendi’s accounting 

practices and disclosures to the market were commenced in both the U.S. and France, including: (a) 

a criminal investigation by French prosecutors; (b) a criminal investigation by the U.S. Department 

of Justice; (c) an investigation by the Commission des Operations de Bourse (“COB”), now the 

AMF; and (d) a formal civil investigation by the SEC. 

JURISDICTION AND VENUE

16. The claims asserted herein arise under and pursuant to (i) Sections 11, 12(a)(2) and 

15 of the Securities Act, 15 U.S.C. § 77k, 77l(a)(2), and 770; (ii) Sections 10(b), 18 and 20(a) of the 

Exchange Act, 15 U.S.C. §§ 78j(b), 78r, and 78t(a), and the rules and regulations promulgated 

thereunder by the SEC, including Rule 10b-5, 17 C.F.R. § 240.l0b-5; and (iii) state common law. 

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17. This Court has jurisdiction over the subject matter of this action pursuant to (i) 28 

U.S.C. §§ 1331, 1332 and 1367; (ii) Section 22 of the Securities Act, 15 U.S.C. § 17v; and (iii) Section 

27 of the Exchange Act, 15 U.S.C. § 78aa. 

18. This court may properly exercise subject matter jurisdiction over the claims of 

foreign purchasers of Vivendi ordinary shares traded on foreign markets under the “conduct test” 

articulated by the Second Circuit, which provides that a federal court has subject matter jurisdiction 

if (1) the defendant’s activities in the United States were more than “merely preparatory” to a 

securities fraud conducted elsewhere, and (2) these activities or culpable failures to act within the 

United States “directly caused” the claimed losses. 

19. In a decision by Judge Baer in a class action filed against Vivendi on claims and facts 

virtually identical to the case at bar (In re Vivendi Universal, S.A. Securities Litigation, 381 F. Supp. 2d 

158 (S.D.N.Y. November 3, 2003) (Civil Action No. 02-Civ 5571(RJH)) the Court denied the 

Defendants’ motion to dismiss in that case pursuant to Rule 12(b)(1), finding that the Court 

possessed subject matter jurisdiction over claims brought by foreign class members who acquired 

Vivendi ordinary shares traded on foreign markets. (Id. at 169). 

20. In doing so, the Court applied the “conduct” test set forth by the Second Circuit in 

order to determine extraterritorial application of the federal securities laws. Judge Baer found that 

the Defendants’ conduct within the United States was not merely preparatory but “was a substantial 

or significant contributing cause of foreign investors’ decisions to purchase Vivendi’s stock.” Id. at 

170 (internal quotations omitted) 

21. Such conduct within the United States included Vivendi acquiring well-known U.S. 

entertainment and publishing companies (Universal Studios, Houghton Mifflin, USA Networks), 

and taking on a $21 billion debt while assuring investors “through false and misleading reports filed 

with the SEC and news releases that it had sufficient cash flow to manage its debts.” Id. at 169. 

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22. In addition to the U.S. acquisitions, and significant to the Court, was the fact that 

two of Vivendi’s senior officers (and alleged principal actors of the fraudulent scheme) Messier 

(former CEO) and Hannezo (former CFO), from September 2001 through the end of the relevant 

class period of August 31, 2002, spent half of their time in the United States specifically to increase 

investments by United States investors in Vivendi and to allegedly “better direct corporate 

operations and more effectively promote misleading perceptions on Wall Street.” Id. at 169-170. 

23. Upon Defendants’ motion for reconsideration, Judge Holwell revisited Judge Baer’s 

decision finding subject matter jurisdiction and concurred with Judge Baer’s opinion finding 

jurisdiction pursuant to the conduct test. (See In re Vivendi Universal, S.A. Securities Litigation, 2004 WL 

2375830 (S.D.N.Y. October 22, 2004)). 

24. The Court went further to formally concur with Judge Baer’s opinion, stating; “this 

Court concurs with Judge Baer’s opinion finding jurisdiction over this dispute pursuant to the 

conduct test ....” 

25. Moreover, the Court found that in addition to the allegedly false statements made to 

Wall Street analysts, on which Judge Baer based his opinion, Judge Holwell found of “crucial 

importance” to jurisdiction the presence and conduct of Messier and Hannezo in the United States. 

Id. a*7. 

26. Defendants engaged in extensive fraud-related conduct in the U.S., which was part 

of a single fraudulent scheme spanning the U.S. and other countries. The domestic conduct was not 

merely “preparatory,” but led directly to losses by both foreign and domestic investors. In addition 

to the substantial U.S. conduct in furtherance of the fraud, Vivendi has a vast U.S. presence that 

justifies the exercise of subject matter jurisdiction over Plaintiffs’ claims who, relying on the health 

and value of Vivendi’s substantial U.S. businesses, acquired Vivendi ordinary shares traded on 

foreign and U.S. markets, and were defrauded by Defendants’ misrepresentations. 

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27. The fraud perpetrated on the worldwide market by Vivendi came directly from the 

Company’s $77 billion acquisition spree, during which Vivendi acquired several high profile U.S. 

companies, spending in excess of $54 billion for its U.S. interests. For example, the following U.S. 

companies, among others, were acquired in whole or in part by Vivendi: 

COMPANY 

ACQUIRED 

U.S. 

LOCATION 

PURCHASE 

PRICE 

Waste Management Inc. Houston, TX € 103.5 million 

US Filter Corp. Palm Desert, CA $ 6.2 billion 

Seagram Company Ltd. Universal City, CA $ 34 billion

Uproar.com New York, NY $ 128 million 

MP3.com, Inc. San Diego, CA $ 400 million 

Emusic.com San Diego, CA $ 24 million 

Houghton Mifflin Co. Boston, MA $ 2.2 billion 

EchoStar Communications Corp. Littleton, CO $ 1.5 billion

USA Networks New York, NY $ 10.3 billion 

28. In addition to Vivendi’s U.S. acquisitions, a large number of Defendants’ false and 

misleading statements were initially made in the U.S. and all were disseminated within the U.S.. 

Vivendi also regularly filed false and misleading reports with the SEC in the U.S., including Form 

20-F Annual Reports and numerous Form 6-Ks as alleged herein. 

29. In addition, Defendants’ false and misleading statements not made in the U.S. were 

disseminated into the U.S. and internationally through the means and instrumentalities of interstate 

commerce, including but not limited to the mails, interstate telephone communications and the 

facilities of the national securities markets. 

30. According to the Company’s Form 20-F for the fiscal year ended December 31, 

2001, signed and filed with the SEC on May 28, 2002 (the “2001 20-F”), over 54% of Vivendi’s long 

lived assets, valued at €53.522 billion, were located in the U.S. The 2001 20-F also states that 

Vivendi’s 2001 U.S. revenue was purportedly over €7 billion. At a luncheon in Los Angeles on 

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January 19, 2002, Defendant Messier stated that Vivendi was “[f]orty percent within the United 

States, sixty percent out of the states,” and in a February 17, 2002 interview on CNN, Defendant 

Messier stated that the Company “has 50,000 U.S. employees.” 

31. Venue is proper in this District pursuant to (i) Section 22 of the Securities Act, 15 

U.S.C. § 77v; (ii) Section 27 of the Exchange Act, 15 U.S.C. § 18aa; and (iii) 28 U.S.C. § 1391(b). 

Vivendi conducts business and maintains the Company’s U.S. headquarters in this District. In 

addition, back in 2001 through 2002 Defendant Messier resided in this District when he moved 

himself and his family into a $17 million penthouse apartment in Manhattan. Defendant Messier 

currently resides in this District on the Upper East Side. During his February 17, 2002 CNN 

interview, Defendant Messier explained why he moved to New York: 

Moving to New York, yes there [were] very simple reasons. The first 

one Vivendi Universal has 50,000 U.S. employees. They have a boss. 

Where is the boss? The boss is in the U.S. He’s working there. I 

can meet with them. I can spend time with them. He is really the 

boss. 

The second goal was Vivendi International is a new group for many 

U.S. investors in the media field. We need and I needed to spend 

more time with the U.S. Universal community to explain the Vivendi 

Universal story, to go through all reasons of performances of 

prospects, and I think that it’s just better to do it being an American, 

than being outside. 

Similarly, in an interview on “Market Call” from New York on February 27, 2001, Defendant 

Messier reiterated that one of the primary reasons for moving to New York was to promote Vivendi 

to U.S. investors and Wall Street: 

I’m not frustrated. I’m enthusiastic about doing and continuing and 

persuading this education job [for American investors and Wall Street 

analysts]. Since the merger, the level of U.S. investors in all capital 

has jumped from less than 10 percent to more than 25 percent. I 

have a very simple goal in mind. I want the level of U.S. investors, 

within Vivendi Universal, to reach as quickly as possible 50 percent 

of all capital...I will take any necessary step to convince and educate 

Wall Street and U.S. investors. 

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In addition, many of the acts and practices complained of herein, including the dissemination of 

materially false and misleading statements, occurred in this District. 

32. In connection with the acts alleged in this Complaint, Defendants, directly or 

indirectly, used the means and instrumentalities of interstate commerce, including but not limited to 

the mails, interstate telephone communications and the facilities of the national securities markets. 

THE PARTIES

33. Capitalia Asset Management SGR, S.p.A. is an asset management company that 

manages mutual funds. Capitalia Asset Management SGR, S.p.A. belongs to the Capitalia Group, 

which ranks fourth in the Italian mutual fund market. 

34. Capitalia Investment Management S.A. is a Luxembourg asset management company 

that manages mutual funds. Capitalia Investment Management S.A. belongs to the Capitalia Group. 

35. Defendant Vivendi describes itself as a global conglomerate engaged in business 

focused primarily on two core areas: “Media and Communications” and “Environmental Services.” 

Vivendi’s Media and Communications business is divided into five segments: (a) Music (conducted 

through Universal Music Group, which produces, markets, and distributes recorded music 

throughout the world in all major genres); (b) Publishing (purportedly Europe’s premier publisher of 

information, which provides content across multiple platforms, including print, multimedia, on the 

wired Internet and to PDAs (Personal Digital Assistants) via WAP (Wireless Application Protocol) 

technology); (c) TV and Film (which produces, distributes and licenses motion picture, television 

and home video/DVD products worldwide, owns and operates a number of cable and pay TV 

channels, and operates theme parks and retail stores around the world); (d) Telecoms (which 

provides a range of telecommunications services, including mobile and fixed telephony, Internet 

access, and data services and transmission, principally in Europe); and (e) Internet (which manages 

strategic Internet initiatives and new online ventures). Defendant Vivendi Universal, S.A. is the 

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entity created by the Merger, and is named as a Defendant herein in its own right and as the 

successor entity and successor-in-interest to Vivendi, SA., Seagram and Canal Plus. 

36. Vivendi Environnement, a subsidiary of Vivendi, operates the Company’s worldwide 

environmental services business, including its water utility operations. 

37. Defendant Messier was Vivendi’s Chief Executive Officer and Chairman of the 

Company’s Board throughout the Relevant Period until he was forced to resign on July 3, 2002. 

Messier received compensation of $4.8 million in 2001 despite the Company’s record loss, as well as 

various other perquisites, including use of a $17 million apartment the Company acquired for him in 

New York. 

38. Defendant Hannezo was Chief Financial Officer of Vivendi throughout the Relevant 

Period until his resignation on July 9, 2002. Hannezo was, according to the Associated Press, a “close 

collaborator” of Messier. 

39. It is appropriate to treat the Individual Defendants as a group for pleading purposes 

and to presume that the materially false, misleading and incomplete information conveyed in the 

Company’s public filings, press releases and other publications as alleged herein are the collective 

actions of the narrowly defined group of defendants identified above. Each of the Individual 

Defendants, by virtue of their high-level position with the Company, directly participated in the 

management of the Company, was directly involved in the day-to-day operations of the Company at 

the highest levels and was privy to confidential proprietary information concerning the Company 

and its business operations, products, growth, financial statements, and financial condition, as 

alleged herein. The Individual Defendants were involved in drafting, preparation and/or 

dissemination of the various public, shareholder and investor reports and other communications 

alleged herein, were aware of, or recklessly disregarded, that materially false and misleading 

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statements were being issued regarding the Company, and approved or ratified these statements, in 

violation of the federal securities laws. 

40. Because of their Board memberships and/or executive and managerial positions with 

Vivendi, each of the Individual Defendants had access to the adverse non-public information about 

the business, operations, finances, markets, financial statements, and present and future business 

prospects of Vivendi particularized herein via access to internal corporate documents, conversations 

or communications with corporate officers or employees, attendance at management and/or Board 

of Directors’ meetings and committees thereof and/or via reports and other information provided 

to them in connection therewith. 

41. The statements made by the Individual Defendants, as particularized below, were 

materially false and misleading when made. The true financial and operating condition of the 

Company, which was known or recklessly disregarded by the Individual Defendants, remained 

concealed from the investing public. The Individual Defendants, who were under a duty to disclose 

those facts, instead misrepresented or concealed them. As officers and directors, and controlling 

persons, of a publicly held company governed by the provisions of the federal securities laws, each 

of the Individual Defendants had a duty to promptly disseminate accurate and truthful information 

with respect to Vivendi’s financial condition and performance, growth, operations, financial 

statements, business, products, markets, management, earnings and business prospects, and to 

correct any previously-issued statements that had become materially misleading or untrue, so that 

the market price of the Company’s publicly traded securities would be based upon truthful and 

accurate information. The Individual Defendants’ misrepresentations and omissions violated these 

specific requirements and obligations. 

42. The Individual Defendants, because of their positions of control and authority as 

officers and/or directors of the Company, were able to and did control the content of the various 

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SEC filings, press releases and other public statements pertaining to the Company. Each Individual 

Defendant was provided with copies of the documents alleged herein to be materially misleading 

prior to or shortly after their issuance and/or had the ability and/or opportunity to prevent their 

issuance or cause them to be corrected. Because of their positions and access to material non-public 

information available to them but not the public, each of the Individual Defendants knew or 

recklessly disregarded that the adverse facts specified herein had not been disclosed to, and were 

being concealed from, the public and that the representations concerning the Company complained 

of herein were then materially false and misleading. Accordingly, each of the Individual Defendants 

is responsible for the accuracy of the public reports and releases detailed herein and is therefore 

primarily liable for the representations contained therein. 

43. Each of the Individual Defendants is liable as a direct participant in a fraudulent 

scheme and course of business that operated as a fraud or deceit on Plaintiffs by disseminating 

materially false and misleading statements and/or concealing material adverse facts. The scheme: (i) 

deceived the investing public regarding Vivendi’s business, operations, management and the intrinsic 

value of Vivendi ordinary shares and ADSs; (ii) enabled the Company to complete numerous 

acquisitions in its multi-billion dollar buying spree; (iii) permitted Vivendi to maintain credit ratings 

so that Vivendi could accumulate more and more debt to make acquisitions on terms favorable to 

Vivendi; and (iv) caused Plaintiffs to purchase and acquire Vivendi ordinary shares and ADSs at 

artificially inflated prices. 

FACTUAL BACKGROUND

44. In June 1996, Messier became chairman of Generale des Eaux, Vivendi’s 

predecessor. At that time, Generale des Eaux was -- as it had been since it was founded in the 19th 

century -- primarily a water utility company. When Messier became CEO in 1996, Vivendi’s stock 

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was trading in the €27 to €29 range. Messier changed the name of Generate des Eaux to “Vivendi” 

in April 1999. 

45. After becoming CEO, Messier embarked on an ambitious plan to turn the Company 

into one of the world’s largest media companies. Beginning in 1998, Vivendi acquired the following 

companies:1

COMPANY 

ACQUIRED 

CLOSING 

DATE 

% ACQUIRED 

Quotidien Sante 4/9/98 100% 

Linjebuss AB 4/15/98 66.7% 

(33% owned) 

Havas SA/Old 6/2/98 70% 

(30% owned) 

Cia de Saneamento do Parana 6/8/98 41.38% 

Ediciones Doyma SA 6/25/98 50% 

l’Etudient 11/10/98 100% 

ScVK 11/18/98 43.17% 

OVP-Vidal 11/23/98 100% 

Vivendi Universal 12/15/98 10.5% 

ALPINAGmbH 1/5/99 100% 

Cendant Software 1/12/99 100% 

Pathe 1/26/99 19.6% 

(5% owned) 

FCC 3/5/99 28% 

Aique 4/20/99 100% 

US Filter Corp. 4/30/99 100% 

SL Tunnelbanan AB 5/4/99 60% 

MediMedia 5/12/99 100% 

18 Litre Water Division 5/20/99 100% 

Sani Gestion Inc. 6/11/99 100% 

MUSIDISC 6/30/99 99.02% 

Canal Plus 7/22/99 15% (34% owned) 

British Sky Broadcasting PIc 7/22/99 4% (20.5% owned) 

Aqua Alliance Inc 8/24/99 17% (83% owned) 

 

1 Pre-existing ownership interest, if any, shown in parenthesis. 

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COMPANY 

ACQUIRED 

CLOSING 

DATE 

% ACQUIRED 

Pathe 9/30/99 80.2% (19.8% owned) 

Superior Services Inc. 11/11/99 100% 

23 GPU In. Power plants 11/24/99 100% 

Elektrim Telekomunikacja 12/9/99 49% 

Daesan Power Plant 12/17/99 100% 

The StayWell Company 2/29/00 100% 

Three V Health Inc. 2/29/00 100% 

Haniel Rohr; Kanal Service & 

Haneil Industrie Reinigung 3/28/00 100% 

Prize Central Network 3/29/00 100% 

KD Offshore 5/30/00 100% 

Quod Bonum BV 8/17/00 80% 

Prelude et Fugue 9/20/00 100% 

Poland.ComSA 9/21/00 55.01% 

46. Messier’s early growth strategy required the Company to finance its acquisitions, 

which caused the Company to accumulate large amounts of debt. For example, in March 1999, 

Vivendi had to finance its $6.2 billion acquisition of U.S. Filter Corp. (“U.S. Filter”) by raising 

approximately €5.7 billion through a convertible bond offering. Similarly, in December of 1999, 

Vivendi increased its equity investment in Elektrim Telekomunikacja (“ET’), a Polish conglomerate, 

to $1.2 billion (or 49% of ET’s equity), by investing an additional $250 million in cash and 

converting an earlier $615 million loan into ET shares. 

47. In June 2000, Vivendi announced the acquisition of Seagram (which owned 

Universal Studios and Polygram Records) for $36 billion and Canal Plus for $12 billion, both in 

Vivendi common stock. 

VIVENDI CONTINUES TO ACQUIRE COMPANIES

48. Following the Merger on December 8, 2000, many analysts expected Vivendi to 

make sure that its newly merged and recently acquired businesses were achieving desired synergies 

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before consummating new deals. Defendants, however, did not do so. Within just sixteen months 

following the large three-way merger with Seagram and Canal Plus, Vivendi acquired significant 

equity positions (or added to its existing equity positions) in the following companies, several of 

which Vivendi acquired outright: 

COMPANY CLOSING 

DATE 

INDUSTRY % ACQUIRED 

Maroc Telecom 12/21/00 TelecomServices 35% 

MUSIDISC 1/31/01 Multimedia 0.98% (99.02% owned) 

Medicine Publishing 2/1/01 Publishing 100% 

HCCOM 2/19/01 Publishing 100% 

Uproar Inc. 3/23/01 Internet Connectivity 100% 

GetMusic LLC 4/25/01 Internet Content 50% (50% owned) 

Editions Juris Service 4/25/01 Multimedia 100% 

Emusic.Com Inc 6/14/01 E-Commerce 100% 

RMM Records & Video 6/25/01 Music 100% 

Scoot EuropeNV 7/27/01 Broadcast Server 50% (50% owned) 

HoughtonMifflinCo. 8/3/01 Publishing 100% 

MP3.com 8/28/01 Internet Content 100% 

ElektrimTelekomunikacja 9/4/01 Telecom Services 2% (49% owned) 

Mediabright 9/12/01 Applications 

Software 

100% 

Studio Canal 10/12/01 Motion Pictures 

Services 

14.8% (85.20% owned) 

Multithernatiques 12/17/01 CableTV 27% 

EchoStarCommunications 1/22/02 Satellite Telecom 10% 

KochGroupRecorded Music 2/15/02 Music 100% 

USA Network Entertainment 5/7/02 Cable TV 93% 

49. The vast majority of these post-Vivendi/Seagram/Canal Plus merger acquisitions 

were paid for either using Vivendi stock as currency, or by borrowing against future earnings. Thus, 

in order to sustain its growth by acquisition strategy, it was crucial for Defendants to continue to 

report favorable financial results in order to keep Vivendi’s stock price high and to maintain its 

favorable credit ratings and access to additional debt financing. 

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FALSE AND MISLEADING STATEMENTS

50. On October 30, 2000, Vivendi issued a Registration Statement filed on Form F-4 

with the SEC and signed by defendants Messier and Hannezo in connection with the Merger of 

Vivendi, Seagram, and Canal Plus. The Form F- 4 presented historical financial statements for FY 

1999 and the first half of FY 2000. Vivendi reported revenue of $16.427 billion and net income of 

$509 million for the first half of FY 2000; and revenue of $17.487 billion and net income of $254.6 

million for the comparable period in 1999. Vivendi also reported shareholders’ equity of $11.957 

billion and total assets of $73.611 billion as of June 30, 2000. 

51. However, for the reasons set forth in greater detail below at ¶¶ 124-193, Vivendi’s 

historical financial statements and balance sheets contained in Vivendi’s October 30, 2000 Form F-4 

were materially false and misleading because, inter alia, the Company improperly consolidated into its 

financials revenue from its Cegetel subsidiary (in which the Company had less than 50% ownership), 

failed to timely write-down impaired goodwill from previous corporate investments and acquisitions, 

including U.S. Filter, and overstated the Company’s revenue from its environmental division on 

certain multi-year contracts in violation of GAAP. 

52. On December 22, 2000, Vivendi issued a press release announcing that it had 

purchased a 35% stake in Maroc Telecom S.A. (“Maroc Telecom”), Morocco’s telephone monopoly 

for approximately €2.3 billion. 

53. On February 14, 2001, Vivendi issued a press release in Paris and New York 

announcing preliminary results for FY 2000: 

Vivendi Universal’s preliminary total revenues for 2000 totaled 41.7 

billion euros, with media and communications and environmental 

services accounting for 40.0 billion euros, a global 36.5% increase 

over 1999. Jean-Marie Messier, Chairman and CEO of Vivendi 

Universal, said, “Vivendi Universal was created on December 8, 

2000. The 2000 Vivendi Universal figures are showing the 

considerable burst of growth of our communications activities in 

2000 both in global growth and even more important with a near 

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20% internal growth. Vivendi Universal enters its first full year of 

operations with strong growth prospects and a very strong balance 

sheet. This new company is off to a fast start and we are very 

confident that we will meet the very aggressive growth targets we 

have set for ourselves both at the revenues and EBITDA levels.” 

[Emphasis added.] 

54. On March 9, 2001, Vivendi issued a press release reporting “better than expected” 

fourth quarter and FY 2000 results. Vivendi announced actual revenues of €41.8 billion for FY 

2000 including Media and Communications revenues of €13.6 billion and Environmental Services 

revenues of €26.5 billion. The press release further stated: 

Vivendi Universal announced today that on a pro forma basis for 

calendar 2000, the Company reported 7.2 billion euros in EBITDA 

(earnings before interest, taxes, depreciation and amortization) for 

the period ending December 31, 2000, up 48 percent from 1999. 

Results reflect strong performance across the Company’s business 

units -- Media and Communication and Environmental Services. 

Actual EBITDA for the 12 months ended December 31, 2000, was 6 

billion euros versus 4.3 billion euros in 1999. 

The pro forma results were driven by growth in all business segments 

with the exception of Internet, in which development costs related to 

business expansion continued to have a negative impact on earnings . 

. . . 

Net income climbed 44 percent, before goodwill, to 2.8 billion euros 

or 4.4 percent basic shares up 19% and 60 percent, after goodwill, to 

2.3 billion euros, from 1.4 billion euros. The Board of Directors of 

Vivendi Universal has recommended to the shareholders to approve 

an annual dividend of one euro per-share, which will represent a high 

47 percent pay-out ratio . . . . 

Jean-Marie Messier, Chairman and [CEO] of Vivendi Universal, 

stated: “The strong results that Vivendi Universal has generated for 

calendar 2000 provide a very solid foundation for the Company’s 

growth prospects in 2001. The robust performance of Vivendi 

Universal’s business segments clearly reflects the fast pace and clear 

momentum that we have established as Vivendi Universal enters 

2001. The Company’s unique combination of content and 

distribution assets paves the way for enormous growth opportunities. 

We have our management teams and plans in place as we moves [sic] 

to execute the growth strategies. The management team, in 

particular, has been focused on the day-to-day operational 

performance and increased productivity of each of the Company’s 

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business units. I am very confident that, for Media and 

Communications, we will reach our revenue growth target of 10 

percent and our aggressive EBITDA growth target of 35 percent for 

the period 2000-2002 and achieve superior returns for Vivendi 

Universal shareholders . . . . Our businesses are strong, our 

management is focused and growth prospects are real and 

immediate.” [Emphasis added.] 

55. On March 12, 2001, as reported in La Tribune, defendant Messier stated the 

Company had exceeded expectations: 

Franco-Canadian media and communications group Vivendi 

Universal SA (VU) has announced its results for 2000, which were in 

line with forecasts, and has confirmed its objectives for 2001. 

Presenting his group’s results for the year, VU chairman Jean-Marie 

Messier commented: “When we merged, it was said that our aims 

were too ambitious. Well, we have exceeded them!” [Emphasis 

added.] 

56. The statements made by Defendants referenced in ¶¶50-55 above, were each 

materially false and misleading because, inter alia, the Company was engaged in improper accounting 

practices which had the effect of materially overstating Vivendi’s reported earnings (as particularized 

below at ¶¶ 124-193), including: (a) failing to timely write-down certain overvalued assets from 

previous corporate investments and acquisitions; (b) improperly consolidating into its financials 

revenue from its Cegetel subsidiary in which the Company had less than 50% ownership; and (c) 

overstating the Company’s revenue from certain multi-year contracts. In addition, the Company 

failed to disclose that it was suffering from a growing liquidity crisis (as particularized below at ¶¶ 

186-193) and that Vivendi would necessarily heed to restructure its debt obligations in order to 

remain solvent and avoid bankruptcy. 

57. On April 23, 2001, Vivendi issued a press release announcing “very strong” first 

quarter 2001 results. The press release announced that Media and Communications revenues were 

up 10% to €5.9 billion, and Telecoms revenues were up 30% to €1.5 billion. The press release 

further reported that Media and Communications EBITDA increased 112% to €900 million and 

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that Telecoms EBITDA more than tripled to €433 million. The press release quoted Defendant 

Messier as follows: 

“I am very pleased with Vivendi Universal’s outstanding performance 

in our first quarter as a new company. All our results meet or exceed 

our key operating targets. We created significant momentum by 

delivering solid first quarter 2001 results in EBITDA, which more 

than doubled, and by generating double digit revenue growth...

These results show the focus and dedication of all our management 

teams, in executing the unique promise of Vivendi Universal around 

its global strategy. This is a great beginning. With our momentum, 

our targets and the drive of our executive team, I am extremely 

confident that for Media and Communications, we will reach our 

annual EBITDA and revenue growth targets of 35% and 10%, 

respectively in 2001 and 2002 and achieve superior returns for 

Vivendi Universal shareholders . . . . 

We are also ahead of targets for the synergies which indicate that the 

path of integration between our teams is great. My only focus is and 

remains execution of this compelling media merger.” (Emphasis 

added) 

58. On April 24, 2001, Defendant Messier addressed Vivendi’s shareholders at the 

Company’s shareholders’ meeting: 

The foundations of our communications-related businesses are 

particularly healthy and strong. Guillaume Hannezo has just detailed 

our performance for you. I would just like to emphasize a few 

points: 

- a healthy balance sheet with total equity reaching 66 billion 

Euro;

- a pro forma net debt that is practically non-existent - around 

three billion Euro;

- Vivendi Universal posted record-high net income, and has 

cash available for investing (participation in BskyB, etc.); 

- Vivendi has rapidly growing revenue, which reach the double 

digits annually, spread out through all the European and 

American markets (60% and 40%); extraordinarily large 

customer bases; several dozen million subscribers; business 

models often based on subscription - meaning loyalty, 

recurrence, predictable revenues, and very little dependence 

on the advertising market. 

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Financially, Vivendi Universal, concerning the communications 

sectors, is rock solid - very stable with high growth... 

 In my role as the president and as an employee of the company, I 

owe you the company’s results. Here they are. They are good . . . . 

Vivendi Universal, our company, your company, is solid. Today, we 

are a leader, strong, dynamic, and profitable. [Emphasis added.] 

59. On May 18, 2001, Vivendi filed a Form 6-K with the SEC providing total revenue 

information for first quarter 2001. This Form 6-K stated in part: 

Vivendi Universal revenue for first quarter of 2001 totaled 12.6 

billion euros, a global 34.5% increase over the first quarter of the 

prior year. Vivendi Universal’s media and communications 

businesses accounted for 5.9 billion euros and environmental services 

businesses accounted for 6.7 billion euros. [Emphasis added.] 

60. The statements made by Defendants referenced in ¶¶ 57-59 above, were each 

materially false and misleading because, inter alia, the Company was engaged in improper accounting 

practices which had the effect of materially overstating Vivendi’s reported earnings (as particularized 

below at ¶¶ 124-193), including: (a) failing to timely write-down overvalued assets from previous 

corporate investments and acquisitions; (b) improperly consolidating into its financials revenue from 

its Cegetel subsidiary in which the Company had less than 50% ownership; and (c) overstating the 

Company’s revenue from certain multi-year contracts. In addition, the Company failed to disclose 

that it was suffering from a growing liquidity crisis (as particularized below at ¶¶186-193) and that 

Vivendi would necessarily need to restructure its debt obligations in order to remain solvent and 

avoid bankruptcy. 

61. On June 1, 2001, Vivendi issued a press release announcing the acquisition of 

Boston-based Houghton Mifflin Company. The release, issued in Paris and Boston, stated in part: 

Based on a total consideration of approximately $2.2 billion, which 

includes the assumption of Houghton Mifflin’s average net debt of 

$500 million, the offer price represents 1.9 times 2001 estimated 

revenues of Houghton Mifflin, 7.7 times 2001 estimated EBITDA 

(earnings before interest, taxes, depreciation and amortization) and 

10.7 times estimated EBITDA after book plate amortization. 

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62. On July 2, 2001 Vivendi filed its Form 20-F for the fiscal year ended December 31, 

2000 with the SEC, which was signed by defendant Hannezo. The 20-F contained Vivendi’s 

“consolidated financial statements for the years ended December 31, 2000, 1999 and 1998 and as at 

December 31, 2000 and 1999.” 

63. On July 23, 2001, Vivendi issued a press release announcing its “very strong” second 

quarter and first half 2001 Media and Communications results. Vivendi reported Media and 

Communications revenues were up 16% (excluding Universal Studios Group) to €6.6 billion, and 

EBITDA grew 57% to €1.3 billion. Concerning Vivendi’s first half 2001 results for Media and 

Communications businesses, the press release stated in part: 

- In the course of the first half of 2001, Vivendi Universal 

achieved three quarters of its full-year target of incremental 

EBITDA (nearly 800 million euros excluding Maroc 

Telecom, relative to the company’s target of slightly more 

than 1 billion euros). 

- In the first half of 2001, revenues increased to 12.4 billion 

euros (up-15% [excluding USGD], and EBITDA grew to 2.2 

billion euros (up 77% over 2000 comparable period). 

64. Defendant Messier commented on the results, stating in part as follows: 

The results produced by Vivendi Universal in the second quarter are 

well ahead of market consensus . . . . They confirm the robustness of 

our businesses, with limited exposure to advertising; the benefits of a 

truly global position; and the fast progress of the reorganization and 

implementation of our recent merger. 

With three quarters of the ‘aggressive’ incremental EBITDA target 

for the full year 2001 [1.12 billion euros of incremental EBITDA, or 

35%, over the pro forma 2000 guidance provided last October and 

slightly above 1 billion euros of incremental EBITDA over the final 

2000 results] already achieved in the first half of the year, I can only 

re-emphasize our confidence. We will at least meet our stated targets. 

Obviously, our current stock price does not fully reflect this situation 

in terms of EBITDA multiples or Enterprise Value to EBITDA to 

growth. With the highest growth rates of the industry and the lowest 

multiples, our stock is definitely an attractive investment today. 

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The first half has been a period of total operational focus in each of 

our businesses, while completing significant achievements in the 

implementation of the merger, reorganization and execution of our 

strategy. [Emphasis added.] 

65. Following the July 23, 2001 press release, Vivendi hosted a conference call to discuss 

the second quarter 2001 results and the Company’s business and prospects. During the call, 

Defendant Messier and others in Vivendi management stated: 

• Vivendi was able to achieve strong results even in a down 

market and was in fact gaining market share. 

• The Company was still on track to achieve strong growth in 

revenues and earnings in 2001, including EBITDA growth of 

35%. 

66. As a result of the press release and the false and misleading statements therein, on 

July 23, 2001, Vivendi common stock increased 5% to €63.1. 

67. Securities analysts that followed Vivendi reacted positively to the Company’s 

announcement of second quarter 2001 results. For example, in a report dated July 23, 2001, 

Robertson Stephens, Inc. (“Robertson Stephens”) issued a “Buy” rating stating: “We expect the 

company to perform well through a sluggish economy and to emerge strategically well-positioned.” 

Similarly, Merrill Lynch Capital Markets (“Merrill Lynch”) issued a “Buy” rating in an analyst report 

dated July 26, 2001, stating in pertinent part as follows: 

- Outperformance was across virtually all divisions particularly 

Film, Telecoms and Music. 

- As a result, we are upgrading our 2001 OCF a second time by 

2% . . . . 

- Company re-confirmed its targets for 2001. In a down music 

market, Universal is gaining share and is confident of double 

digit EBITDA growth. 

68. The statements made by Defendants referenced in ¶¶ 61-67 above, were each 

materially false and misleading because, inter alia, the Company was engaged in improper accounting 

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practices which had the effect of materially overstating Vivendi’s reported earnings (as particularized 

below at ¶¶124-193), including: (a) failing to timely write-down overvalued assets from previous 

corporate investments and acquisitions; (b) improperly consolidating into its financials revenue from 

its Cegetel subsidiary in which the Company had less than 50% ownership; and (c) overstating the 

Company’s revenue from certain multi-year contracts. In addition, the Company failed to disclose 

that it was suffering from a growing liquidity crisis (as particularized below at ¶¶ 186-193) and that 

Vivendi would necessarily need to restructure its debt obligations in order to remain solvent and 

avoid bankruptcy. 

69. In early September 2001, as rumors circulated that Vivendi’s earnings would be 

disappointing, Vivendi’s ADSs declined from the mid-$50s to the mid-$40s per share, and its 

ordinary shares declined from the mid-€5.0s to the mid-€40s. In response, Defendants categorically 

denied any problems and, after the market closed on September 5, 2001, reiterated its targets for 

2001 and 2002. Defendant Messier stated in an interview with Reuters that evening, that “no profit 

warning of any kind needs to be feared coming from Vivendi Universal.” 

70. On September 25, 2001, Vivendi issued a press release announcing “Strong First 

Half 2001” results and a “Solid Outlook for 2002.” The press release reported that revenues 

increased 11% to €26.4 billion, that EBITDA grew 42% to nearly €4 billion, that operating income 

grew 65% to €1.9 billion, and that net income, before goodwill amortization, reached €1.1 billion or 

€0.97 per share. With respect to Media and Communication, the release reported that first half 2001 

revenues reached €12.4 billion, up 15%, EBITDA reached €2.2 billion, up 77%, and that operating 

income nearly tripled to €946 million, up 184%. Concerning Vivendi’s environment business, the 

release reported that revenues were up 11% to €13.9 billion, that EBITDA was up 12% to 1.76 

billion euros, and that operating income was up 13% to 0.9 billion euros. Commenting on these 

results, the press release further quoted Defendant Messier as follows: 

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Despite the current environment, we will reach all our previously 

stated revenue/EBITDA objectives for the 2001 year. I continue to 

express my confidence in achieving our more than 10% revenue 

growth targets for 2001 and our more than 35% EBITDA growth 

(versus the company’s October 2000 guidance) at a constant-asset 

base. This, combined with some extensions in the company’s asset 

base (i.e., MarocTelecom and Houghton Mifflin), should result in fullyear Media and Communications EBITDA slightly north of 5 billion 

euros. In the current environment, giving a 2002 target would not be 

meaningful, and we have yet to complete our 2001 budget and plan 

process. Before the recent tragedy [of September 11], market 

consensus for 2002 EBITDA was not far from 6 billion euros. 

Despite the events, looking at the trends of our businesses and our 

defensive qualities, we are currently very confortable [sic] with this 

expectation. (footnote omitted) 

71. On October 30, 2001, Vivendi issued a press release announcing its third quarter 

2001 Media and Communications results. The release announced that Media and Communications 

revenues were up 2.4 % to €7.3 billion, and that EBITDA was up 90% to €1.5 billion. The release 

further reported that Telecoms revenues increased by 17% to €2.1 billion, and EBITDA growing by 

31% versus pro forma results for the third quarter of 2000. The release also stated in pertinent part: 

- On a pro forma basis, third quarter revenue growth was 8% 

and EBITDA growth was 30%. Year-to-date revenues 

increased 9%, and EBITDA increased 46%. 

- Company reaffirms confidence in achieving its growth 

targets: 10% revenue growth and 35% organic EBITDA 

growth in 2001. 

“Our third quarter results/or the media and communications 

businesses, with 24% revenue and 90% EBITDA growth, including 

organic growth of 8% and 36% respectively, are obviously strong 

despite the tough environment,” said Jean-Marie Messier, Chairman 

and [CEO] of Vivendi Universal. “They reflect both our higher 

potential/or growth and greater resiliency to recessionary 

environments compared to many of our peers . . . . 

“Additionally, Vivendi Universal’s media and communications 

businesses are presently less vulnerable to recessionary environments 

than many of our peers because of our strong defensive qualities . ... 

Having the highest resiliency and lowest sensitivity to a recessionary 

environment explains our ability to outperform most of our peers. 

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“An early look at the fourth quarter indicates that we are on track to 

meet our targets. I continue to express my confidence in achieving

10% revenue growth and 35% EBITDA growth in 2001 at a constant 

asset base. This, combined with some expansions in the company’s 

asset base (i.e., MarocTelecom and Houghton. Mifflin), should result 

in full-year Media and Communications EBITDA slightly above 5 

billion euros. (emphasis added; footnotes omitted) 

72. Following the October 30, 2001 Press Release, Vivendi hosted a conference call to 

discuss the third quarter 2001 results and the Company’s business and prospects. During the call, 

Defendants Messier and others in Vivendi management stated: 

• Vivendi was able to achieve strong results even in a down 

market and was in fact gaining marketshare. 

• The Company was still on track to achieve strong growth in 

revenues and earnings in 2001. 

73. Based on Defendants’ statements, including those made during the conference call, 

securities analysts reacted positively to the Company’s reported financial results. For example, on 

October 31, 2001, Morgan Stanley Dean Witter (“Morgan Stanley”) issued an “Outperform” rating, 

stating: 

We continue to accord Vivendi Universal on OutPerform-V rating 

with a Euro62 twelve-month price target. Our investment thesis is 

based on VU’s valuation, lack of sensitivity to economic recession, 

and diversity of revenue sources. In a quarter in which all its peers 

were forced to revise their 2001 and 2002 outlooks downward to 

reflect continued US economic weakness exacerbated by the events 

of Sept. 11, Vivendi Universal outperformed expectations and 

reiterated its full year guidance. The divergence between VU and its 

peers reflects the company’s high level of financial predictability, a 

direct function of owning a number of internationally diversified, 

market share-leading businesses that have a low dependence on 

advertising. 

74. The statements made by Defendants referenced in ¶¶ 69-73 above, were each 

materially false and misleading because, inter alia the Company was engaged in improper accounting 

practices which had the effect of materially overstating Vivendi’s reported earnings (as particularized 

below at ¶¶ 124-193), including: (a) failing to timely write-down overvalued assets from previous 

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corporate investments and acquisitions; (b) improperly consolidating into its financials revenue from 

its Cegetel subsidiary in which the Company had less than 50% ownership; and (c) overstating the 

Company’s revenue from certain multi-year contracts. In addition, the statements failed to disclose 

that the Company was suffering from a growing liquidity crisis (as particularized below at ¶¶ 186-

193) and that Vivendi would necessarily need to restructure its debt obligations in order to remain 

solvent and avoid bankruptcy. 

75. On December 6, 2001, Vivendi issued a press release in which defendant Messier 

assured the investing public that Vivendi “is in a very strong position, with solid performance in 

virtually every business.” One week later -- after announcing that it would raise $2.5 billion by 

selling a $1.5 billion interest in BskyB and a $1.06 billion interest in Vivendi Environnement -- 

Vivendi stated, as reported by the Financial Times (London) on December 14, 2001, that these asset 

sales would give Vivendi “room to manoeuvre” for additional acquisitions, and enable it “to cover 

any eventual needs from different opportunities for strategic partnerships.” 

76. On December 17, 2001, Vivendi issued a press release announcing the acquisition of 

USA Networks for $10.3 billion. Commenting on the acquisition defendant Messier stated in 

pertinent part as follows: 

Our strategy is clearly coming together. Combining within the same 

operational entity, VUE, USG and the entertainment assets of USA 

creates a new U.S. major, which will benefit from the full integration 

of TV and movies activities with production and distribution. 

* * * 

In addition, this strategic move will significantly benefit Vivendi 

Universal shareholders, because of its significant value-accretion at 

every level EBITDA, net income and free cash flow. By using mainly 

non-core, consolidated assets to acquire this control, we are strongly 

positioned to enhance performance and value to Vivendi Universal 

shareholders. 

* * * 

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At the end of just one year following our merger with Seagram and 

Canal+, we have put the pieces together in fulfilling our strategy. In 

one short year, we have focused on integration and addressing our 

relative distribution weakness in the U.S. - and here we are today. 

We expect that 2002 will be a year of growth, without further change 

in perimeter. 

77. On December 17, 2001, Defendant Messier held a press conference with Barry 

Diller, Chairman and CEO of USA Networks, from the St. Regis Hotel in New York City to discuss 

the acquisition of USA Networks, creation of Vivendi Universal Entertainment (“VUE”), and 

Vivendi’s prospects for 2002: 

At the end of the day, this transaction is not putting pressure on 

Vivendi Universal. On the reverse, what it allows us to do is to 

increase our [EBITDA] target for 2002 by more than ten percent. 

It’s to increase our net income in 2002 by roughly 200 million dollars. 

It’s to increase the net free cash flow of the group in 2002 by, let’s 

say, three hundred and fifty million dollars. At every level of the 

[P&L] and of the cash flow that you may look at, this transaction is 

very positive to VUE shareholders year one. 

* * * 

As far as the global [debt] ratio of the group is concerned, our target 

is to have in ‘02 a [debt] to [EBITDA] ratio well below three times 

and especially we are focusing to reach that target ahead of the end of 

the first half of 2002, which means that Vivendi Universal will end up 

its program of selling its non core asset in the first half of ‘02; it will 

give us very comfortable triple B credit rating targets that we are very 

comfortable with.... So, no cleaning of balance sheet because the 

balance sheet is clean. . . , [W]e are committed to issue full US 

[GAAP] earnings starting Ql of ‘02. We already, in fact, worked on 

the basis of US [GAAP] accounting methods in ‘01 in order to build 

our track record at the time of this year, at the time of the release of 

our first full quarterly U.S. [GAAP] in ‘02. So we are already applying 

all US [GAAP] methodologies, including those relating to 

amortization. [Emphasis added.] 

78. The statements made by Defendants referenced in ¶¶ 75-77 above, were each 

materially false and misleading because, inter alia, the Company was engaged in improper accounting 

practices which had the effect of materially overstating Vivendi’s reported earnings (as particularized 

below at ¶¶ 124-193), including: (a) failing to timely write-down overvalued assets from previous 

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corporate investments and acquisitions; (b) improperly consolidating into its·financials revenue from 

its Cegetel subsidiary in which the Company had less than 50% ownership; and (c) overstating the 

Company’s revenue from certain multi-year contracts. In addition, the Company failed to disclose 

that it was suffering from a growing liquidity crisis (as particularized below at ¶¶ 186-193) and that 

Vivendi would necessarily need to restructure its debt obligations in order to remain solvent and 

avoid bankruptcy. 

79. On February 6, 2002, AFX News Limited reported that in an attempt to dispel 

concern about the Company’s debt levels and accounting practices, a letter was distributed to the 

Company’s employees stating that no profit warnings were forthcoming: 

Vivendi Universal CEO Jean-Marie Messier said the media company 

will not make any change in its guidance for 2001 earnings due for 

release on March 5, although the fourth quarter was a difficult period. 

Messier made the comment in a letter to Vivendi’s staff, addressing 

the recent volatility and losses in the company’s share price . . . . 

“Some global markets, including the music market, declined during 

this period. But despite the difficulties, we are the only media 

company not to have issued a profit warning on its operating results 

and there’s no change to that situation,” said Messier. 

* * * 

“There are no hidden risks and no speculative instruments,” he said. 

[Emphasis added.] 

80. On February 11, 2002, Vivendi issued a press release announcing its year-end 2001 

Media and Communications results. Vivendi announced Media and Communications “pro forma 

revenue growth of 9% for the year ended December 31, 2001, reaching 28.9 billion euros.” The 

release further reported that Vivendi’s Telecoms segment achieved 24% revenue growth in 2001, 

and that “[r]evenue growth was 10% using the 2000 perimeter excluding Universal Film, exactly in 

line with management estimates given 12 months ago.”

81. Commenting on the results, Defendant Messier stated: 

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I am pleased that we achieved our ambitious target of 10% organic 

revenue growth in 2001, for the businesses resulting from Vivendi’s 

merger with Seagram and Canal +. Organic growth is, more than 

ever in today’s markets, the most important strength of Vivendi 

Universal. Achieving the highest level of growth in our industry is a 

big differentiation of Vivendi Universal, and the operating 

management deserves recognition for fulfilling their growth 

objectives and outperforming their peers in a difficult year. Our 2001 

results give us confidence that we can achieve our growth targets 

again in 2002. [Emphasis added.] 

82. On February 12, 2002, in response to the Company’s early release of positive results, 

The New York Times reported: 

“Vivendi is one of the few companies in the global media sector 

which has not issued a revenue or Ebitda warning,” said Mark 

Harrington of J.P. Morgan, referring to a common measure of gross 

operating profit. “So it demonstrates the structural growth of the 

company relative to its global media peers,” he said of today’s report. 

83. On March 3, 2002, Defendant Messier was quoted in the Financial Times as stating 

that “Vivendi had only two significant off-balance sheet structures, one relating to shares it is selling 

in BSkyB and another relating to four buildings: ‘There are no hidden risks and no speculative 

instruments.’” 

84. On March 5, 2002, Vivendi issued a press release announcing its year-end 2001 

results. Vivendi reported a charge for impairment to goodwill under French GAAP of €12.6 billion, 

including €6 billion for Canal Plus. Vivendi also announced that revenues were up 10% and that 

operating income was up 47% to €3.795 billion, on a pro forma basis. The release stated that 

“[g]iven the excellent operational results, a 1 euro per share dividend will be submitted to the 

shareholders at the annual meeting.” The release further reported Media and Communications 

revenues of €28.115 billion, representing 10% pro forma revenue growth, EBITDA of €5.036 

billion, representing 34% pro forma EBITDA growth, and operating income of €1.838 billion, 

representing 89% pro forma growth. In addition, the release reported that Telecom’s pro forma 

revenue was up 24% to €8 billion, that EBITDA increased 49% to €2.5 billion, Environmental 

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Services revenue was up 11%to €29.1 billion and operating income increased 24% to €2.0 billion. 

The release also stated in part: 

After having been the only large media company not to modify any 

of its guidance for the year 2001, Vivendi Universal reiterates its 

confidence in the strength of its businesses and their performance 

and their ability to grow. For 2002, no other new guidance will be 

expressed, apart from the company’s full confidence to reach for its 

Media and Communications businesses. 

85. The March 5, 2002 press release also touted the Company’s “Operating Free Cash 

Flow” as being “ahead of guidance” announcing Media and Communications operating free cash 

flow of €2.026 billion, “up 2 billion euros over 2000.” Commenting on the results, Defendant 

Messier stated in part as follows: 

I am very pleased with the excellent operating results that have been 

achieved. These results confirm the strength of Vivendi Universal’s 

businesses across the board despite a very difficult global economic 

environment. 

Most of our businesses improved market share, EBITDA and free 

cash flow during this period of global economic slowing. Even more 

important, those operational performances are showing improvement 

at every level of our P&L. The good EBITDA to EBIT 

transformation ratio: 68% of incremental EBITDA translating in 

incremental EBIT, is a strong and positive sign. The improvement 

of operational free cash-flow (FCF) at a higher rate than EBITDA 

indicate[s] the clear focus given in 2001 to cash management. We 

will continue this effort. 

* * * 

We stay fully committed to conveying full transparency in our 

financial results. Vivendi Universal is not only transparent but is the 

only media and communications [company] not to change its 

numbers and targets, it underscores its commitment to accurate, 

conservative and consistent reporting in every area of its operations. 

[Emphasis added.] 

86. On March 5, 2002, during an investor conference call, Defendant Messier discussed 

the Company’s fiscal year 2001 results and fiscal year 2002 expectations and attempted to minimize 

the importance of the €12.6 billion write-down in goodwill as follows: 

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I just want to say a very quick points before going to your questions. 

And I- the first point here based on the fact that we experienced 

excellent operating results in the ‘01 and obviously that’s very 

fortunate because this excellent operating results in ‘01 are also in the 

captive of the future and then we’ll drive our future. I think that we 

build our operational reserve but what I want to point out is that if 

we continue or renewed on the EBITDA growth target results and 

add to our main in the quarter ‘01. We did all of this. Our operating 

pre cash flow target, we average Euro 2 million instead of the 

guidance of Euro 1.2 - 1.5 million [sic]. Obviously the fact that the 

more you go to cash the more we over this --- the guidance that we 

gave to the market is a strong sign of the quality of the casual 

management in working above the requirements and CAPEX 

management in ‘01. That goes to the same direction is that we did 

overcome largely all targets in terms of cash service. We save Euro 

200 million EBITDA, we reach 300 EBITDA 100 more, and close to 

Euro 600 million total cash savings. The operations and these 

business achievements, I think that we owed them to our competitive 

advantages that were evident in ‘01. That: (1) the excellent quality of 

management; (2) the fact that we gain market share in about every 

single of our business. Those gains of market shares coming from 

[scale and scope]; (3) the assets mix, maximize our ability to go to 

digitalization for delivery on the mobile devices; and (4) to our global 

footprint minimizes of earnings volatility. That’s the business 

achievement. 

87. On March 6, 2002, Lehman Brothers issued a report based in part on the statements 

made by Vivendi’s management in the March 5, 2002 conference call: 

In its post results conference call, management confirmed that the 

value adjustments to the US assets . . . reflected largely a change in 

accounting treatment and did not signal a negative outlook for the 

US water business. 

88. Similarly, Bear Stearns issued a report on March 6, 2002, based on the March 5, 2002 

conference call, stating in pertinent part as follows: 

The company disclosed that the €19 billion of net debt has an 

average maturity of 4-years and an average cost of 4.1%. 

Management pointed out that the strength of the group’s finances is 

underlined by a recently negotiated 5-year credit facility at 45 basis 

points over LIBOR. 

* * * 

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For ‘02, Management reiterated their guidance of 10% organic sales 

growth for all the Media Communications businesses. Vivendi also 

expects EBITDA of close to €6 billion (pre-USA Networks and preStream). 

89. The statements made by Defendants referenced in ¶¶ 79-88 above, were each 

materially false and misleading because, inter alia, the Company was engaged in improper accounting 

practices which had the effect of materially overstating Vivendi’s reported earnings (as particularized 

below at ¶¶ 124-193), including: (a) failing to timely write-down overvalued assets from previous 

corporate investments and acquisitions; (b) improperly consolidating into its financials revenue from 

its Cegetel and Maroc Telecom subsidiaries, in which the Company had less than 50% ownership; 

and (c) overstating the Company’s revenue from certain multi-year contracts. In addition, the 

statements failed to disclose that the Company was suffering from a growing liquidity crisis (as 

particularized below ¶¶ 186-193) and that Vivendi would necessarily need to restructure its debt 

obligations in order to remain solvent and avoid bankruptcy. 

90. On April 24, 2002, Vivendi issued a press release announcing its “strong” first 

quarter 2002 Media and Communications results. Vivendi reported a “strong surge of operational 

free cash flow, up 159% to 1.4 billion euros, well ahead of expectations.” The release, issued in 

New York, further reported that “[n]et debt fell from approximately 19 billion euros to 

approximately 17 billion euros.” The release also reported Media and Communications “revenue 

organic growth of 13% to 6.8 billion euros; strong EBITDA growth, up 18% to 1.1 billion euros; 

and solid operating income growth, up 37% to 408 million euros.” Defendant Messier commented 

on these results as follows: 

“The hard numbers in the first quarter show that Vivendi Universal 

has a winning strategy, and demonstrate our commitment to excellent 

management and delivering operating results quarter after quarter. In 

the first quarter, each operating segment delivered its revenue targets, 

and most segments over-delivered EBITDA and operating free cash 

flow compared with their budgets . ... 

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In a difficult environment Vivendi Universal’s businesses gained 

market share. Cash management improved dramatically. Finally, the 

revenue and cost synergies achieved in the quarter were significant. 

Further gains will be driven by improving businesses that currently 

have negative operating free cash flow: Canal+ and Internet 

operations.” 

91. On April 29, 2002, Vivendi issued a press release announcing purportedly “strong” 

results for the first quarter of 2002, including a 12% increase in pro forma consolidated revenue to 

13.2 billion euros. The release, issued in New York, also reported that consolidated operating 

income grew 11% pro forma to 781 million euros, excluding goodwill amortization. In the release, 

defendant Messier commented on the results as follows: 

The consolidated financial results for the quarter demonstrate that 

Vivendi Universal is delivering on the strategy, goals and targets that 

we have articulated to our shareholders. In the first quarter of 2002, 

both Media & Communications and Vivendi Environnement 

delivered their targets. 

The Media & Communications financial results released last week, 

coupled with our consolidated results issued today, are testimony to 

our ability and conviction to deliver, strong results in operations, cash 

flow, EBITDA and net income. As I said last week, because of our 

strong performance in the quarter, we are lowering our estimate of 

Media & Communications year-end Debt EBITDA ratio to less than 

3x by December 31, 2002. 

In a very difficult economic environment characterized by many 

market uncertainties, Vivendi Universal’s global businesses gained 

market share. In addition, strong improvement was achieved in cash 

management, debt reduction, synergies, management development 

and revenue growth. 

92. The April 29, 2002 press release further touted the Company’s allegedly strong cash 

flow position: 

on a pro forma basis, excluding Vivendi Universal’s publishing 

businesses to be disposed of (including the B-to-B and Health 

businesses whose sale is expected to be completed in the second 

quarter), Media and Communications reported: 

• A strong surge of operational free cash flow, up 159% to 1.4 

billion euros, well ahead of expectations; 

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• Strong operating results in the first quarter: revenue organic 

growth of 13% to 6.8 billion euros; EBITDA growth, up 

18% to 1.1 billion euros; and solid operating income growth, 

up 37% to 408 million euros. All were significantly ahead of 

budget. [Emphasis added.] 

93. Following the Company’s April 29, 2002 Press Release, Merrill Lynch issued a 

research report dated April 30, 2002 that rated the Company a “strong buy” premised on the 

Company’s allegedly strong financial position. Specifically, the Merrill Lynch report stated that the 

“strong buy” recommendation was based, in part, on the fact that “Vivendi has now stated its net 

debt/EBITDA objective is less than 3x by the end 2002 . . . .” 

94. The statements made by Defendants referenced in ¶¶ 90-93 above, were each, 

materially false and misleading because, inter alia, the Company was engaged in improper accounting 

practices which had the effect of materially overstating Vivendi’s reported earnings (as particularized 

below at ¶¶ 124-193), including: (a) failing to timely write-down overvalued assets from previous 

corporate investments and acquisitions; (b) improperly consolidating into its financials revenue from 

its Cegetel and Maroc Telecom subsidiaries in which the Company had less than 50% ownership; 

and (c) overstating the Company’s revenue from certain multi-year contracts. In addition, the 

statements failed to disclose that the Company was suffering from a growing liquidity crisis (as 

particularized below at ¶¶ 186-193) and that Vivendi would necessarily need to restructure its debt 

obligations in order to remain solvent and avoid bankruptcy. 

95. On May 3, 2002, Moody’s lowered the Company’s long-term debt rating to Baa3, the 

lowest investment grade -- one notch above the “junk” status assigned to speculative investments. 

According to Moody’s, the ratings downgrade reflected Moody’s concern that Vivendi “might not 

be able to reduce debt as quickly and comprehensively as planned.” 

96. That same day, Vivendi issued a press release criticizing Moody’s decision and 

attempting to downplay its significance: 

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The company believes that this decision does not fully take into 

consideration the currently poor market conditions and the fact that 

the agency does not take into account immediately the whole of the 

debt reduction program planned by Vivendi Universal. 

This decision has no impact on Vivendi Universal’s cash situation. It 

does not trigger any renegotiation clauses or advance repayments of 

bank credit lines. In addition, Vivendi Universal’s use of commercial 

paper in the current amount of 1.6 billion euros is well covered by 

back-up lines of more than 3 billion euros, the availability of which 

will not be affected by the rating change. 

Vivendi Universal affirms that it has every confidence in its ability to 

meet its operating targets for 2002, as proved by its first-quarter 

results. The company’s totally determined to carry through its debt 

reduction program in order to make a rapid return to a comfortable 

position with a Baa2 rating. 

97. On May 6, 2002, the International Herald Tribune reported: 

Vivendi Universal SA could be forced to unwind billions of dollars in 

off balance-sheet derivatives transactions if its credit rating slips any 

further, according to a detailed report of the company’s accounts 

filed with U.S. regulators. 

A downgrade Friday by Moody’s Investors Service Inc. of Vivendi’s 

long-term debt to Baa3 from Baa2 places the company’s bonds 

within a notch of junk, or non-investment-grade status. That, in 

turn, puts the world’s second-largest media conglomerate within a 

hair’s breadth of triggering an immediate settlement of €3.5 billion 

($3.21 billion) worth of so-called total return swaps, a kind of credit 

derivative, documents filed last month with the Securities and 

Exchange Commission show. Hundreds of millions of dollars in 

losses on total return swaps and other esoteric derivatives deals have 

been the focus of at least one lawsuit filed against Enron Corp. and 

its auditor, Arthur Andersen LLP, by shareholders and employees of 

the bankrupt U.S. energy trader. 

Derivatives are generally defined as financial instruments that derive 

their value from an underlying asset such as a stock. In a total return 

swap, parties make payments to each other based on an asset’s 

appreciation and depreciation, with the payment rate determined by a 

complex formula. Vivendi stressed Friday that the rating change had 

no impact on its cash situation, adding that the move “does not 

trigger any renegotiation clauses or advance repayments of bank 

credit lines.” The statement did not mention the possibility of 

accelerated settlement of debt or swap agreements. 

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Asked about the implications of a further ratings downgrade for its 

total return swap agreements, Antoine Lefort, a Vivendi spokesman, 

declined to answer Sunday, saying: “This is not the subject. Our goal 

is to carry through the debt reduction program in order to make a 

rapid return to a comfortable position with a Baa2 rating.” 

But in a 100-page annual financial statement filed with the SEC on 

April 15, Vivendi stated that it had entered into a number of longterm financing agreements that provided for early redemption if 

Moody’s cut the company’s credit rating below Baa3 or Standard & 

Poor’s Corp. cut it below BBB-minus, its equivalent rating. S&P 

currently rates Vivendi at BB with a stable outlook. 

Vivendi’s SEC filing says, “Total return swap agreements set up at 

the time of the sales of BSkyB and AOL Europe provide for an early 

unwind if Vivendi is downgraded below BBB-minus.” 

The report indicates that the total notional value of the two return 

swap transactions was 3.51 billion as of Dec. 31. Notional principal 

underlying a swap is usually much greater than the true risk exposure 

of the parties to the transaction. Vivendi did not quantify its actual 

risk exposure in the report. 

The swap transactions relate to the sale of investments in rival media 

companies ordered by EU regulators as a condition for approval of 

Vivendi’s $34 billion acquisition of Seagram Co. of Canada in 

December 2000. Vivendi agreed to dispose within two years of its 22 

percent stake in British Sky Broadcasting Group PLC, the satellitetelevision unit of Rupert Murdoch’s News Corp. Last September, 

Vivendi arranged a complex transfer of the stake to Deutsche Bank 

AG of Germany in exchange for a four-year, 4.2 billion loan. 

Vivendi also said in the filing that it had entered into a separate twoyear total return swap transaction in June 2001 in connection with the 

sale of $719 million worth of preferred shares in AOL Europe, an 

AOL Time Warner Inc. unit, to an unidentified financial institution. 

Further details were not provided. 

98. On May 28, 2002, Vivendi filed its Form 20-F for the fiscal year ended December 

31, 2001 with the SEC, which was signed by defendant Hannezo. The 20-F contained Vivendi’s 

consolidated financial statement for the year ended December 31, 2001. The 20-F also reported as 

follows: 

Net Cash Flow from Operating Activities – Net cash flow provided by 

operating activities totaled €4.5 billion in 2001, an increase of €2 

billion from 2000. The increase was attributed to operating earnings 

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generating incremental cash flow of €1.1 billion and improvements in 

working capital of €1.5 billion, partially offset by approximately €600 

million of cash payments made for the settlement of restructuring 

and merger-related liabilities. Of the improvements in working 

capital, €0.8 billion was generated by Vivendi Environnement 

primarily due to the implementation of a receivables securitization 

program. In 2000, operating activities provided net cash of €2.5 

billion compared to €0.8 billion in 1999. The significant 

improvement was primarily due to increased earnings generated by 

our Telecoms, Publishing and Environmental Services businesses. 

Net Cash Flow from Investing Activities – Net cash flow provided by 

investing activities was €4.3 billion in 2001 compared to net cash flow 

used for investing activities of €1.5 billion in 2000. Contributing to 

cash from investing activities was €9.4 billion from the sale of our 

spirits and wine business and €4 billion from the disposal of our 

investment in BSkyB; partially offset by capital expenditures for 

tangible and intangible assets net of sales proceeds of €4.9 billion and 

the acquisitions of Houghton Mifflin for €2.0 billion and Maroc 

Telecom for €2.4 billion. In 2000, net cash used for investing 

activities was €1.5 billion compared to €12.9 billion in 1999. The 

significant decrease primarily reflects fewer strategic acquisitions paid 

for in cash in 2000 compared to 1999 . . . . Proceeds from the 

disposal of investments and fixed assets were €6.9 billion in 2000 

compared to €4.5 billion in 1999, mainly attributable to the 

divestiture of non-core real estate, construction assets and GPU 

power generation plants. 

Net Cash Flow from Financing Activities – In 2001, net cash flow used for 

financing activities was €7.5 billion, the principal components of 

which included a €5.9 billion repayment of long-term borrowings and 

other liabilities, a €1.7 billion decrease in short-term borrowings, the 

purchase of treasury stock for €4.3 billion and cash dividends paid of 

€l.4 billion, partially offset by €5.2 billion proceeds from the issuance 

of long-term borrowings and other liabilities and €0.6 billion net 

proceeds from the issuance of common stock. In 2000, net cash flow 

used for financing activities of €0.6 billion compared to net cash 

provided by financing activities of €13.7 billion in 1999. The yearon-year variance was primarily due to the Merger Transactions. In 

July 2000, the sale of 37% of Vivendi Environnement through an 

IPO contributed to an increase in financing transactions of €3.8 

billion. 

99. By late-May 2002, with Vivendi’s ordinary shares trading in the €31 to €33 range in 

response to concerns about its debt levels, Defendants once again sought to reassure financial 

markets by issuing the following press release on May 30, 2002: 

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Vivendi Universal confirms having obtained agreement from the 

banks to delete the clauses that linked the availability of credit lines to 

a rating level. The Company’s bank credit line [is] therefore, no 

longer dependent on rating agencies’ decisions. 

Additionally, the Company has no reason to anticipate or fear any 

further deterioration in its credit rating.

Vivendi Universal has also confirmed that, after payment of the 

dividend and the acquisition of USA Networks, its available credit 

lines that have not been used to date amount to almost 3.5 billion 

euros. Also, its use of commercial paper is limited to about l billion 

euros, and the reimbursement of expected debts during the coming 

months is limited. 

This cash situation, which, the Company believes, is comfortable -

even assuming an extremely pessimistic market - will enable the 

Company to continue its debt reduction program with confidence 

and with a view to creating the best possible value for its 

shareholders. [Emphasis added.] 

100. During the following weeks, however, concerns about Vivendi’s debt levels 

continued to put downward pressure on Vivendi’s securities. In response, on June 25, 2002, 

Vivendi issued a press release reiterating its prior statement concerning the positive steps it had 

taken to reduce debt and announcing that the Company’s cash position was not precarious. The 

release highlighted the main points of the Company’s plans as follows: 

• DEBT REDUCTION: 

- The active implementation of a debt-reduction plan has enabled Vivendi Universal 

to collect over €5.1 billion during the first half of the year, to which can be added the 

disappearance of its financial risk on BSkyB shares (€2.5 billion) and the imminent 

sale of the B2B health activities. 

- As a consequence, net debt will be lowered in 2002 and senior management’s target 

(under U.S. definition) is to bring it down from about €19 billion to €15 billion. 

- That level represents a net debt-to-EBITDA ratio of below 2.5 times on a 

consolidated basis and of around 3 times on a proportional basis (to eliminate the 

impact of the minority interests in telecoms). 

• CASH SITUATION: 

- Vivendi Universal has €3.3 billion available in unused credit lines, an amount that 

well exceeds its commercial paper of €912 million. 

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- Early repayment clauses in loan agreements apply to less than €170 million and the 

various bank covenants will all be complied with at both June 30 and December 31, 

2002. 

- The Company will also continue its policy of increasing the average length of its 

debt. 

* * * 

I - CHANGE IN DEBT SITUATION 

1) According to the U.S. definition of net debt (gross debt less cash), Vivendi Universal’s net 

debt (excluding Vivendi Environnement) fell from around €19 billion at December 31, 2001 

to approximately €17billion at March 31, 2002, (and from €14.6 billion to €12.8 billion under 

French GAAP). The main factors that will impact debt under U.S. practices in the second 

quarter were or will be: 

-Cash inflows: 

The proceeds from the sale of the BtoB and Health activities of the publishing division 

(VUP) for nearly €l billion in debt, scheduled for the end of June. The proceeds from the 

disposal of the Canal+ Nordic satellite platform for €270 million 

-Cash outflows: 

The Vivendi Universal dividend payment in May, for €1.05 billion. The payment in May of 

the cash portion of the USA transaction, for €1.8 billion. 

Furthermore, the restructuring of Vivendi Environnement’s equity brought Vivendi 

Universal €1.5 billion in cash in the second quarter and will reduce net debt by the same 

amount at December 31, 2002. The disposal of certain real estate assets for €120 million, 

committed in May, will reduce debt in the third quarter. 

The total value of the disposals carried out or definitively entered into during the first half of 

2002 represents more than €6 billion in cash (sale of treasury stock for €3.3billion, B2B 

assets for €0.9 billion, Canal+Nordic for €0.27 billion, real property assets for €0.l billion 

and proceeds from Vivendi Environnement of €1.5 billion). VU’s financial risk was reduced 

by an additional €2.5 billion when the BskyB transaction was unwound. 

2) By December 31, 2002, and with the current shareholder structure of Cegetel still in place, 

Vivendi Universal is lowering its net debt target to below €1.5 billion (in accordance with 

current U.S. accounting principles), corresponding to a net reduction of over €4 billion since 

the beginning of the year. This target represents a ratio of debt to estimated 2002 EBITDA 

of below 2.5 times, including Cegetel and Maroc Telecom, as is required by both U.S. and 

French accounting standards. Using “proportional” levels of estimated 2002 EBITDA and 

debt adjusted for the minority interests of Telecoms, the debt target ratio is around 3 times 

EBITDA. 

This new debt target, which is lower than that so far announced, has been made possible by 

the rapid progress made in the debt-reduction plan during the first half of the year. 

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3) In addition to transactions already finalized and its operating free cash flow, the company 

expects to meet its debt target by continuing to dispose of non-core assets. Certain disposals 

are already under way and proceeds from them, if they are all consummated before 

December 31, 2002, are expected to be well in excess of the amount required to meet the 

year-end debt target. 

4) About half of Vivendi Universal’s debt is in the form of securities, and the other half is in 

bank loans. Around 60% is in euros and 40% in dollars. The company’s aim is to extend the 

average length of its debt, firstly by reducing it and allocating income from disposals to 

short-term debt repayment, and then by replacing the remaining short-term debt by 

medium- to long-term debt. 

As a first step, carried out at the beginning of 2002, Vivendi Universal replaced €3 billion of 

short-term debt with a five-year syndicated loan at a spread of 47.5 basis points over 

EURIBOR. Vivendi Universal is planning a €1-2 billion bond issue during the year to 

replace short-term debt. 

II – CASH SITUATION 

1) At this point in time, Vivendi Universal has available around €3.3 billion in unused credit 

lines. This is available to back up its commercial paper outstanding of nearly €l billion. 

The cash situation has greatly improved since the beginning of the year. However, it should 

be emphasized that, even while waiting to collect the remaining proceeds from Seagram’s 

spirits and wine business in the fourth quarter of 2001, Vivendi Universal regularly 

maintained an amount of unused credit lines above the value of its commercial paper. 

Owing to its strong free cash flow, combined with the execution of the disposals program 

and potential bond issues, Vivendi Universal is confident of its capacity to meet its 

anticipated obligations over the next 12 months. In particular: 

a. The sale of 15.6% of VE (for €1.5 billion) and the other planned disposals are expected to 

more than cover Vivendi Universal’s anticipated commitments over the coming months, 

which include: 

- making available to Cegetel cash to enable the company to buy TD if SNCF decides to 

exercise its put option during the summer; 

- the cost in cash of paying for put options to VU relating to 15 million shares. Spread over 

the next seven months, this cost represents an amount at each payment date equal to the 

difference between the share price the day when the options are exercised and their average 

strike price of €69; 

- the cost of the price guarantee given by Seagram on Rondor, in the amount of $230 million 

to be paid in March 2003. 

b. The VUE bridge loan put in place at the beginning of 2002 might be refinanced by a VUE 

bond issue, and €1.7 billion in repayments of bank loans with maturities of less than 12 

months are expected to be consolidated and/or refinanced by a planned VU bond issue. 

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c. When the time comes, the company will decide on how to maintain the 2006 due date of 

the issue of bonds convertible into VE shares, which has an early redemption option for 

March 2003 for holders willing to relinquish the bond’s option value. 

2) Furthermore, since the beginning of the year, Vivendi Universal has renegotiated a 

number of bank clauses, in particular those that placed it in the situation of certain loans 

being called if its credit ratings fell below BBB-/Baa3. These clauses originally involved €5.5 

billion in debt, and now apply to less than €170 million. The renegotiations have led to a 

reduction in the average length of financing for marginal amounts of around €200 million. 

The cost of these unused back-up lines has increased by 110 basis points, only if used, 

depending on the amount drawn. Following the renegotiations, Standard & Poor’s removed 

Vivendi Universal from its list of companies exposed to rating triggers. 

The financial undertakings made by the company in the back-up lines are the same as those 

made for the five-year syndicated loan of €3 billion. Vivendi Universal is projecting for June 

30 and December 31 that its financial ratios will meet or exceed the ratios required in these 

contracts. 

Defendants also announced that it would implement a monthly Q&A session to “end the constant 

negative rumors about the company.” 

101. On June 26, 2002, defendant Messier discussed the Company’s debt and liquidity 

during an investor conference call as follows: 

I have read, I held in the markets all certainties, question, rumors in 

the current environment relating to views, view for yourselves, views 

for your accounting and I seen that in those circumstance. The best 

that we can do is to show you [that] there is no hidden liability that’s 

you have all the information to come back. [Emphasis added.] 

102. On June 26, 2002, the Dow Jones International News reported: 

Chairman Jean-Marie Messier said late Wednesday that he plans to 

stay in charge of the embattled media company despite criticism of 

his strategy and a crumbling share price . . . . 

Messier sought to counter those doubts, opening the call with a 

comment that the company has no hidden, off-balance sheet 

liabilities and adding, “We feel very confident looking to our debt and 

cash analysis with all our commitments of the group for the coming 

11 months.” 

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103. Vivendi’s June 25, 2002 press release and subsequent comments by defendant 

Messier reassured a number of market analysts. For example, on June 27, 2002 Merrill Lynch issued 

a “strong buy” recommendation for the Vivendi’s stock, stating: 

We believe the rapid share price fall of some 25% in the last two 

weeks is unwarranted and expect ongoing deleveraging and 

improving confidence in the company’s short term liquidity position 

should begin to revive interest in the shares. 

104. However, statements made by Defendants referenced in ¶¶ 95-103 above, were each 

materially false and misleading because, inter alia, the Company was engaged in improper accounting 

practices which had the effect of materially overstating Vivendi’s reported earnings (as particularized 

below at ¶¶ 124-193), including: (a) failing to timely write-down overvalued assets from previous 

corporate investments and acquisitions; (b) improperly consolidating into its financials revenue from 

its Cegetel and Maroc Telecom subsidiaries in which the Company had less than 50% ownership; 

and (c) overstating the Company’s revenue from certain multi-year contracts. In addition, the 

statements failed to disclose that the Company was suffering from a growing liquidity crisis (as 

particularized below at ¶¶ 186-193) and that Vivendi would necessarily need to restructure its debt 

obligations in order to remain solvent and avoid bankruptcy. 

105. On July 2, 2002, Vivendi’s debt was downgraded again amid reports that the 

Company was in danger of default. On July 2, 2002, Bloomberg reported that defendant Messier “told 

employees in an e-mail that while he may have gone ‘too fast, too far,’ there are ‘no hidden risks’ in 

the company’s accounting.” On July 3, 2002, Vivendi’s CEO, defendant Messier was forced to 

resign. Vivendi ADSs and ordinary shares collapsed upon these revelations, falling to as low as 

$13.40 and €13.90, and closing at $15.66 and €13.90 on huge volumes of 7.4 million and 43.6 million 

shares. 

106. On July 3, 2002, the Company, through its new management, published a press 

release acknowledging that the Company had “a short-term liquidity issue.” The release further 

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stated that Vivendi had to repay creditors 1.8 billion euros by the end of July 2002, and that 3.8 

billion euros in credit lines were up for renegotiation: 

[I]n light of the Moody’s and Standard & Poor’s downgrades of 

Vivendi Universal debt ratings of July 1 and 2, 2002, respectively, as 

well as other events that have occurred over the past several days, 

including the resignation of Mr. Jean-Marie Messier from his 

positions at Vivendi Universal, Vivendi Universal believes it is 

important to update the investor community and the markets 

generally regarding its short-term cash position and liquidity . . . . 

As of July 3, 2002, Vivendi Universal has 1.2 billion euros of cash 

and 1.6 billion euros in unused credit lines of which at least 600 

million euros can be used for general corporate purposes and the rest 

can be used as backing for certain types of its commercial paper (400 

million euros of which is currently outstanding). 

Payments totaling approximately 1.8 billion euros remain due by the 

end of July. These will be financed from resources totaling 

approximately 2.4 billion euros comprising cash and draw-downs on 

existing credit facilities. 

Several of Vivendi Universal’s credit lines automatically roll over at 

certain specific dates in accordance with their terms, subject to 

standard material adverse change provisions. Of those, 

approximately 3.8 billion euros are scheduled to roll-over in July. In 

addition, Vivendi Universal has initiated discussions with its main 

credit banks with a view to putting in place new credit facilities as 

soon as feasible. 

While Vivendi Universal has a short-term liquidity issue, the value of 

the group’s broad and diversified assets by far exceed that of its debt. 

The new management is committed to a program of aggressive 

deleveraging and greater transparency in order to restore health and 

confidence in Vivendi Universal. 

107. On July 3, 2002, in The Columbian, Messier continued to defend Vivendi’s financial 

statements: “There are no underestimated liabilities. There are no overvalued assets,” Messier said. 

“Our results are true, genuine and complete.” 

108. On July 5, 2002, the Globe and Mail Metro reported: 

With new management in place, Vivendi Universal SA finally 

admitted what its ousted chairman and chief executive officer, JeanCase 1:07-cv-05742-RJH Document 1 Filed 06/15/2007 Page 46 of 97
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Marie Messier, had strenuously denied in recent weeks: The mediaand-utility conglomerate is ill danger of a cash crunch. 

Based on a detailed liquidity statement Vivendi put out late 

Wednesday, credit analysts estimate that Vivendi could face a cash 

shortfall of 2.7 billion euros ($2.64 billion U.S.) by the end of the 

year, expanding to as much as 5.5 billion euros by the middle of 2003, 

unless it can quickly secure a new multibillion-euro credit line from 

its lenders. 

The statement came after a three-hour board meeting late Wednesday 

in Paris where the Vivendi board-accepted the forced resignation of 

Mr. Messier. The board, as expected, chose Jean-Rene Fourtou, a 

top executive of Aventis SA, the Franco-German pharmaceutical 

giant, as its new CEO. 

In its statement, Vivendi said it must repay 1.8 billion euros this 

month and said the payment would be financed from 2.4 billion 

euros in existing cash and credit lines. It also has a 3.8-billion-euro 

credit line that will roll over this month unless the banks determine 

there has been a “material adverse change” with the company. 

This grim outlook contrasts with Mr. Messier’s recent assurance that 

the “treasury situation” at Vivendi-owner of Universal Studios, 

Universal Music Group, USA Networks and minority stakes in a host 

of other assets-was “comfortable even in the most pessimistic market 

hypotheses.” [Emphasis added.] 

109. The statements made by Defendants referenced in ¶¶ 105-108 above, were each 

materially false and misleading because, inter alia, the Company was engaged in improper accounting 

practices which had the effect of materially overstating Vivendi’s reported earnings (as particularized 

below at ¶¶ 124-193), including: (a) failing to timely write-down overvalued assets from previous 

corporate investments and acquisitions; (b) improperly consolidating into its financials revenue from 

its Cegetel and Maroc Telecom subsidiaries in which the Company had less than 50% ownership; 

and (c) overstating the Company’s revenue from certain multi-year contracts. In addition, the 

statements failed to disclose that the Company was suffering from a growing liquidity crisis (as 

particularized below at ¶¶186-193) and that Vivendi would necessarily need to restructure its debt 

obligations in order to remain solvent and avoid bankruptcy. 

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110. On August 14, 2002, the Company’s new management stated that, pursuant to 

French GAAP, Vivendi suffered a €12 billion net loss for the first half of 2002 and would take an 

€11 billion goodwill write-down of depreciated assets. Debt-rating agency Standard & Poor’s 

slashed Vivendi’s long-term corporate credit to junk status that same day. As the Associated Press

reported on August 14, 2002: 

Vivendi Universal, the teetering French media conglomerate, 

reported a massive loss of $12 billion for the first half of the year and 

said it will sell $10 billion in assets as it seeks to pare debt, including 

the U.S. publisher Houghton Mifflin. Adding insult to injury, a 

ratings agency downgraded the company’s debt to junk.... 

The sale of Houghton Mifflin, which the company only bought last 

year for $1.7 billion, appeared to mark a first step toward breaking up 

the entertainment and media empire built up by Vivendi’s former 

chairman, Jean-Marie Messier, in a whirlwind of costly acquisitions. 

In all, Vivendi said it hopes to dispose of at least $9.8 billion worth of 

assets - half of them within nine months, the rest within two years. 

“We are facing a liquidity problem,” said chairman Jean-Rene 

Fourtou, who took over July 3 after Messier’s ouster. Fourtou said 

he would “try to avoid any fire sale, but we have negotiations that 

could be concluded very soon if the price was lowered.” 

111. In response to these further stunning developments, on August 14, 2002, Vivendi 

common stock closed at €11.89, down more than €4 (or approximately 25%) from its close the 

previous day. Vivendi’s ADSs suffered a similar decline closing down $3.67 and $11.66 

SEC Investigation, Settlement and Fines 

112. On December 24, 2003, the SEC announced that it had settled an enforcement 

action against Vivendi, and the Individual Defendants (the “SEC Settlement”). 

113. Pursuant to the SEC Settlement, Vivendi consented to pay a $50 million civil money 

penalty. Further, pursuant to the SEC Settlement, Messier agreed to relinquish his claim to a €21 

million severance package that he had negotiated before his forced resignation on July 2, 2002. 

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114. Prior to the SEC Settlement, in or around September 16, 2003, the SEC had filed an 

application pursuant to Section 1103 of the Sarbanes-Oxley Act, in the Southern District of New 

York seeking an order compelling Vivendi to place in escrow (in an account subject to Court 

supervision) any extraordinary payments that Vivendi may make to Messier, including Messier’s 

severance payment. On September 24, 2003, on the SEC’s motion, the Court ordered Vivendi to 

place these funds in escrow. 

115. Further, pursuant to the SEC Settlement, Messier is required to pay a civil penalty of 

$1,000,000 and Hannezo is required to disgorge $143,149 in past bonus payments and to pay a 

penalty of $120,000. Moreover, Messier is prohibited from serving as an officer or director of a 

public company for 10 years and Hannezo is prohibited from serving as an officer or director of a 

public company for 5 years. 

116. The SEC Settlement also enjoins Defendants from further violations of the Federal 

Securities laws. 

117. The Defendants consented to the SEC Settlement. 

118. The SEC Complaint against the Defendants, which resulted in the SEC Settlement, 

alleged claims against the Defendants for financial misrepresentations like those alleged herein, 

among them: 

• During 2001 and the first half of 2002, Vivendi issued misleading press 

releases authorized by Messier, Hannezo, and other senior executives. The 

press releases falsely portrayed Vivendi's liquidity and cash flow as 

"excellent" or "strong" and as sufficient to meet Vivendi's future liquidity 

requirements, were misleading in light of Vivendi's inability unilaterally to 

access the cash flow of two of its most profitable subsidiaries, a situation that 

substantially impaired Vivendi's ability to satisfy its debt burden and other 

operating costs. 

• Vivendi, at the direction of its senior executives, made improper adjustments 

that raised Vivendi's EBITDA by approximately €59 million during the 

second quarter of 2001 and by at least €10 million during the third quarter of 

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2001. These adjustments were made so that Vivendi could meet ambitious 

earnings targets that it had communicated to the market. 

• Vivendi failed to disclose future financial commitments regarding two of its 

subsidiaries. Vivendi failed to disclose the commitments in Commission 

filings and in meetings with analysts. If Vivendi had revealed those 

commitments, they would have raised doubts about the company's ability to 

meet its cash needs.2

119. In relation to the SEC Settlement, the director of the SEC’s Southeast Regional 

Office in Miami, David Nelson, stated “Our lawsuit today demonstrates that even the most complex 

schemes involving foreign issuers will be uncovered and pursued.” (Chinadaily.com.cn, Vivendi, 

Messier Settle SEC Charges, 12/24/2003). 

French Investigations and Convictions

120. On July 9, 2002 Bloomberg reported that French stock regulators, Commission des 

Operations de Bourse (“COB”), now the AMF, launched an investigation into Vivendi’s statements and 

financial condition. French regulators raided Vivendi’s Paris headquarters as part of the 

investigation into whether Vivendi had disclosed all relevant information to investors in the prior 18 

months. The AMF charged that Messier had “deceived the public” and had “‘deliberately issued in 

the company name inexact and falsely optimistic information on the consolidation of Telco and 

(Vivendi’s) debts, cash flow and outlook between October 2000 and April 2002.” (Corporate Ethics 

and Governance, December 7, 2004 (http://www.icego.org/details/vivendi and its former boss 

fined.html). The actions of the AMF resulted in convictions of both Vivendi and Messier. These 

convictions were confirmed by both the French Court of Appeals and the French Supreme Court 

(Cour de cassation) and both Messier and Vivendi were fined €500,000 and, at a minimum, €300,000, 

respectively. 

 

2 http://www.sec.gov/litigation/litreleases/lr18523.htm 

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121. In addition, on October 29, 2002, Bloomberg reported that French prosecutors had 

opened a criminal investigation: 

“The investigation will examine whether Vivendi `published false 

accounts from 2000 and 2001 to hide the true nature of its financial 

situation,’ a spokeswoman for the prosecutor’s office said. It will 

also look at whether the Paris-based company gave misleading 

outlooks for 2001-2002.” 

122. On December 12, 2002, Bloomberg further reported that a police team from the 

Finance Brigade of the Paris Public Prosecutor’s office had raided both Vivendi’s headquarters in 

Paris as well as Messier’s home. The Finance Brigade also raided Canal Plus’s headquarters the next 

day, as well as the homes or offices of various Vivendi directors. This criminal case is currently 

pending and is in the investigation phase under the supervision of 2 independent criminal judges 

(Juges d’Instruction). Messier was held in custody for 2 days during which he was interrogated 

regarding claims of securities fraud and a $2 billion share buyback by Vivendi in 2001. Hannezo had 

also been placed under formal investigation. 

123. At all relevant times, the material misrepresentations and omissions particularized in 

the Complaint directly or proximately caused or were a substantial contributing cause of the 

damages sustained by Plaintiffs. As described herein, Defendants made or caused to be made a 

series of materially false or misleading statements about Vivendi’s business, prospects, operations 

and financial condition. These material misstatements and omissions had the cause and effect of 

creating in the market an unrealistically positive assessment of Vivendi and its business, prospects 

and operations, thus causing the Company’s securities to be overvalued and artificially inflated at all 

relevant times. Defendants’ materially false and misleading statements resulted in Plaintiffs 

purchasing or otherwise acquiring the Company’s ordinary shares and ADSs at artificially inflated 

prices, thus causing the damages complained of herein.

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VIVENDI’S MATERIALLY FALSE AND MISLEADING FINANCIAL

STATEMENTS AND RELATED FINANCIAL MISREPRESENTATIONS

124. Vivendi filed financial statements with the SEC which were represented to have been 

prepared in conformity with GAAP in France (“French GAAP”) during the Relevant Period. The 

SEC allows foreign private issuers, such as Vivendi, to prepare their primary financial statements in 

accordance with a comprehensive body of GAAP other than U.S. GAAP, provided that an 

understanding of such financial statements is facilitated via a reconciliation to U.S. GAAP. 

125. The SEC requires that each annual financial statement filed on Form 20-F and each 

annual and interim financial statement included in an SEC registration statement be reconciled to 

U.S. GAAP. Vivendi’s 1999, 2000 and 2001 annual financial statements filed on Form 20-F, 

represented to have been prepared in conformity with French GAAP, were purportedly reconciled 

to U.S. GAAP. In addition, Vivendi’s 2001 Form 20-F, which was signed by defendant Hannezo, 

represented that, beginning in 2002, the Company’s financial information would be communicated 

on a U.S. GAAP basis and be reconciled to French GAAP. 

126. GAAP are those principles recognized by the accounting profession as the 

conventions, rules, and procedures necessary to define accepted accounting practice at a particular 

time. As set forth in Financial Accounting Standards Board (“FASB”) Statement of Concepts 

(“Concepts Statement”) No. 1, one of the fundamental objectives of financial reporting is that it 

provide accurate and reliable information concerning an entity’s financial performance during the 

period being presented. Concepts Statement No. 1, ¶42, states: 

Financial reporting should provide information about an enterprise’s 

financial performance during a period. Investors and creditors often 

use information about the past to help in assessing the prospects of 

an enterprise. Thus, although investment and credit decisions reflect 

investors’ and creditors’ expectations about future enterprise 

performance, those expectations are commonly based at least partly 

on evaluations of past enterprise performance. 

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127. Regulation S-X [17 C.F.R. § 210.4-01(a)(1)] states that financial statements filed with 

the SEC that are not prepared in conformity with GAAP are presumed to be misleading and 

inaccurate. The representations by the Defendants that Vivendi’s financial statements were 

reconciled to U.S. GAAP were materially false and misleading because the financial statements 

materially inflated and distorted the Company’s true financial performance, as described herein. 

128. In violation of U.S. GAAP and SEC accounting rules and regulations, Vivendi 

misstated its financial statements and masked the Company’s liquidity crisis. Defendants caused 

Vivendi’s employees to engage in a myriad of improper accounting practices, and/or knowingly 

acquiesced in and condoned such practices. These practices concealed the truth about the then 

current state and future prospects of the Company’s business. 

(a) Vivendi’s Improper Failure to Timely Record Impaired Goodwill 

129. Vivendi’s financial statements during the Relevant Period were materially false and 

misleading and presented in violation of U.S. GAAP and SEC rules and regulations because the 

Company failed to timely record an impairment in the value of its reported goodwill. In so doing, 

Vivendi misled investors about cash flows it expected to receive from certain of its recent 

acquisitions. 

130. As noted above, prior to and during the Relevant Period, Vivendi engaged in an 

acquisition spree, which, in the aggregate, resulted in the acquisition of interests in other entities that 

Vivendi valued in excess of $77 billion. Vivendi utilized the “purchase method” of accounting for 

these acquisitions. The purchase method, as set forth in then existing U.S. GAAP’s Accounting 

Principles Board (“APB”) Opinion No. 16, ¶113 provides that: 

 

3 APB Opinion No. 16 has been superseded by FASB’s Statement of Financial Accounting Standard (“SFAS”) 

No. 141. However, SFAS No. 141 carries forward, without reconsideration, the guidance in APB Opinion No. 16 (and 

certain of its amendments and interpretations) related to the application of the purchase method. 

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The acquiring corporation records at its cost the acquired assets less 

liabilities assumed. A difference between the cost of an acquired 

company and the sum of the fair values of tangible and identifiable 

intangible assets less liabilities is recorded as goodwill. 

131. Accordingly, for purposes of accounting for an acquisition transaction, the acquiring 

entity records the acquired assets (both tangible assets and identifiable intangible assets) and 

liabilities assumed at their respective fair values, and the difference between the cost of the acquired 

entity and the respective fair values of the acquired assets, less liabilities, is recorded as goodwill. 

Pursuant to APB Opinion No. 16, the cost of the acquired entity for accounting purposes is 

determined by the fair value of the consideration acquired or issued, whichever is more objectively 

determinable. 

132. Paragraphs 74-75 of APB Opinion No. 16 further provide: 

The fair value of securities traded in the market is normally more 

clearly evident than the fair value of an acquired company. Thus, the 

quoted market price of an equity security issued to effect a business 

combination may usually be used to approximate the value of an 

acquired company. 

* * * 

If the quoted market price is not the fair value of the stock ..., the 

consideration received should be estimated even though measuring 

directly the fair values of the assets received is difficult. 

133. Purporting to apply these principles, Vivendi reported that it recorded goodwill as 

follows when it acquired US Filter, Seagram and Canal Plus: 

(a) US Filter acquisition - € 4.6 billion 

(b) Seagram acquisition - € 25.9 billion 

(c) Canal Plus acquisition - € 12.6 billion 

(i) Canal Plus

134. With respect to the acquisition of Canal Plus in December 2000, Vivendi valued the 

cost of Canal Plus at approximately € 12.5 billion. More than 100% of this cost, or € 12.6 billion, 

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was recorded by Vivendi as goodwill. As required under the purchase method, Vivendi’s reporting 

of € 12.6 billion of goodwill on Canal Plus, when the accounting cost of Canal Plus totaled € 12.5 

billion, indicated that the fair value of Canal Plus’ liabilities exceeded its assets by approximately 

€ 100 million. 

135. In the fourth quarter of 2001, Vivendi recorded a € 6.0 billion charge for an 

impairment in the value of Canal Plus’s goodwill under French GAAP. This was followed by an 

additional € 3.8 billion charge under French GAAP for an impairment in the value of Canal Plus’s 

goodwill during the quarter ended June 30, 2002. Accordingly, by June 2002, Vivendi had written 

off € 9.8 billion, or approximately 78%, of the total € 12.5 billion cost to acquire Canal Plus under 

French GAAP. 

136. However, although Vivendi recognized an initial impairment to goodwill under 

French GAAP in the fourth quarter of 2001, Vivendi did not take any write-off for impaired 

goodwill under U.S. GAAP in 2000 or 2001. As the Company purported to explain in its 2001 yearend financial statements: 

Goodwill Impairment Charge and Impairment of Other Long-Lived Assets

As required under both French and U.S. GAAP [see SFAS No. 121] 

Vivendi Universal reviews the carrying value of long-lived assets, 

including goodwill and other intangible assets, for impairment at least 

annually or whenever facts, events or changes in circumstances, both 

internally and externally, indicate that the carrying amount may not 

be recoverable. Under French GAAP, measurement of any 

impairment is based on fair value. In 2001, following the recent 

market decline, particularly in the Internet, media and 

telecommunications industries, our annual review resulted in a noncash, non-recurring goodwill impairment charge of €12.9 billion 

(€12.6 billion after €0.3 billion minority interest). Under U.S. GAAP, 

measurement of any impairment is based on the provisions of 

Statement of Financial Accounting Standards (SFAS) No. 121, 

Accounting for the Impairment of Long-lived Assets and for Long-Lived Assets 

to Be Disposed Of (SFAS 121). SFAS 121 requires that an impairment 

loss be recognized whenever the sum of the undiscounted future 

cash flows estimated to be generated from the use and ultimate 

disposal of an asset are less than the net carrying value of the asset. 

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On this basis no impairment was indicated and accordingly the 

goodwill impairment charge was reversed. [Emphasis added.]4

137. Accordingly, on March 5, 2002, when the Company initially announced its FY 2001 

results and € 12.6 billion goodwill impairment write-off under French GAAP, and again on May 28, 

2002, when the Company filed its Form 20-F with the SEC, Vivendi -- by refusing to take any 

goodwill impairment write-offs under U.S. GAAP -- effectively represented to investors that the 

cash flows Vivendi expected to receive from the assets it acquired prior to and during the Relevant 

Period equaled or exceeded the carrying value of such assets. 

138. In reality, however, Defendants knew or recklessly ignored from the beginning of the 

Relevant Period that cash flows that they expected from Canal Plus and other acquisitions would 

not equal or exceed the carrying value of those entities. 

139. For example, as set forth in a complaint (“the March 2002 Complaint”) filed by 

Canal Plus in the United States District Court for the Northern District of California in March 2002, 

Defendants knew or recklessly disregarded that an entity known as NDS Group PLC (“NDS”) had, 

since March 1999, “permitted and facilitated the proliferation of counterfeit smart cards that enabled 

users to circumvent the security measures built into the Canal+ conditional access system,” causing 

Canal Plus to suffer losses of over a billion dollars. According to the March 2002 Complaint: 

Through the investment of millions of dollars and thousands of manhours into research and development, Canal+ was able to implement 

effective security measures in its smart cards used to control access to 

digital television signals. These measures proved to be more than 

adequate to protect Canal+’ smart cards from piracy until March 

1999, when Canal+’ smart card software code was copied and 

 

4 Vivendi’s December 31, 2001 financial statements also stated: 

On January 1, 2002, Vivendi Universal will adopt SFAS 142, which provides new measurement 

techniques for goodwill and other intangible assets resulting from business combinations. While its 

evaluation is not yet complete, Vivendi Universal expects to record a non-recurring, non-cash charge of 

approximately € 15 billion in the first quarter of 2002 to U.S. GAAP net income. The impairment reflects 

the overall market decline which has occurred since the Vivendi, Seagram and Canal Plus merger was 

announced in June 2000. The charge will be recorded as a cumulative effect of change in accounting 

principle and will have no affect on Vivendi Universal’s operations. 

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published on a web site called “DR7.com.” Thereafter, counterfeit 

Canal+ smart cards began to appear on the market. The proliferation 

of these counterfeit cards resulted in massive harm to Canal+ and to 

the system operators who depend on the security of Canal+ ‘smart 

cards . . . . 

If smart card pirates obtain Canal+’ new software code, the damage 

to Canal+ will be irreparable. What is released to the public cannot 

be put back in the bottle. The market for counterfeit smart cards is 

massive and the harm from such activities is global. [Emphasis 

added] 

140. As Canal Plus has further alleged: 

Canal+ seeks redress in this action for the damage caused by its 

competitor, NDS. Through the calculated expenditure of millions of 

dollars for specialized equipment and other resources, NDS 

sabotaged C+ Technologies’ [Canal Plus Technologies’] previously 

unbroken security system for access to digital television signals. In 

apparent disregard for both the law and its own reputation, NDS 

caused the development of counterfeit “smart cards,” permitting a 

theft of digital television on a massive scale. Canal+ estimates that 

Defendants’ illegal conduct has caused it harm in excess of 

$1,000,000,000.

* * * 

C+ Technologies has spent substantial time and money developing 

countermeasures to combat each type of pirate smart card that 

resulted from the publication caused by NDS. These 

countermeasures are created by a team of C+ Technologies engineers 

and then tested and broadcast by the digital television operators to 

stop unlawful television viewing by counterfeit card consumers. The 

countermeasures, however, are quickly made obsolete by new 

versions of software for the counterfeit cards that pirates make 

available after analyzing the countermeasures. Counterfeiters are able 

to quickly and effectively respond to each new countermeasure 

because they have access to the UserROM code published on 

DR7.com. C+ Technologies cannot stop this counterfeiting without 

implementing a fundamental change in the design of the smart card. 

At enormous expense, C+ Technologies is currently developing a 

new smart card design and will soon transition its existing network to 

the new design. This transition will be consuming and expensive 

because each and every legitimate smart card will have to be 

exchanged. 

The mass production of counterfeit C+ Technologies smart cards 

has damaged not only Groupe Canal+’s direct revenue through its 

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digital television operators, but has also hurt the sales efforts of C+ 

Technologies and Canal+ USA. Conditional access system 

competitors, especially NDS, use the existence of counterfeit C+ 

Technologies cards as a competitive weapon in the sales process 

among content providers and system operators. For example, 

Canal+ has encountered competitors, including NDS, pointing out to 

customers and potential customers in the United States and 

elsewhere throughout the world, the breach of C+ Technologies’ 

security schemes as evidence that Canal+ cannot guarantee the 

integrity of its systems. In highlighting this supposed security breach, 

Defendants have deceptively failed to disclose that the breach exists 

solely because of Defendants’ own unlawful sabotage. 

As a result of the counterfeiting, Canal Plus has lost sales 

opportunities and has lost customers to its competitors. NDS has 

also used the counterfeiting to attempt to disrupt Canal Plus’ 

relationships with existing customers. 

Another loss occasioned by NDS to Groupe Canal Plus is the loss of 

pay per view subscriptions. One common type of counterfeit access 

is a modification of a legitimate smart card. These cards, commonly 

referred to as “MOSC” cards (i.e. “Modified Official Smart Cards”), 

are legitimate cards, sometimes with valid basic subscriptions, that 

have been altered so they grant their owners rights that they have not 

purchased. Some MOSC cards grant free access to upgraded 

packages or to every subscription channel; others have a number of 

pay per view television “credits” for which the owner has not paid. 

These cards did not exist before the publication on DR7.com and but 

for that publication they would not have been produced. The 

widespread use of MOSCs has caused Group Canal Plus and pay 

television operators from the Canal Plus group to lose revenues from 

premium programs as subscribers are able to have their smart cards 

altered to receive premium programs without paying for them. 

[Emphasis added.] 

This known piracy of Canal Plus’ technology confirms that Vivendi’s goodwill was overstated long 

before the end of FY 2001, when Vivendi first recorded a € 6.0 billion impairment in the value of 

goodwill on its acquisition of Canal Plus. 

141. Similarly, according to a declaration filed on May 13, 2002 in connection with Canal 

Plus’ action against NDS, Jean-Marc Racine, the Director of Marketing for Canal Plus, and former 

CEO of Canal Plus, stated: 

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[J]ust as Canal+ was getting a foothold in the U.S., the piracy of our 

conditional access system became known and Canal+’ efforts to gain 

U.S. market share, based out of Milpitas and later Cupertino, were 

negatively impacted. A company’s reputation, as well as market 

perception of the quality of its product, is important in order to win 

new business, and the piracy of Media Guard had a negative impact 

on Canal+. 

I had several experiences with Canal+ customers that to me evidence 

the impact of the piracy of MediaGuard on Canal+’ Northern 

California operations. For example, Canal+ Technologies, Inc. 

expended a great deal of resources trying to win a contract with 

Cablevision in New York. We lost this contract to NDS, and 

Cablevision told us that it was choosing NDS because NDS knew 

how to combat piracy better than Canal+. In another instance, I 

believe that NDS actively flaunted the hacking of Canal+’ conditional 

access system when it was in competition with Canal+ to win a full 

end-to-end system contract from RCN, an over-builder based in 

Princeton, New Jersey, which has significant operations in major U.S. 

cities, including San Francisco. Canal+ Technologies, Inc.’s only real 

competition for the RCN business was NDS. Several times, RCN, 

which was in contact with NDS at the time, mentioned the piracy of 

MediaGuard that had occurred after our codes were published on 

DR7. On May 29, 2001, RCN asked us to comment on several 

articles and other information contained on web sites regarding the 

hacking and counterfeiting of Canal+’ smart cards . . . . This set of 

articles is extensive and had to take more than a few hours to 

prepare. It was sent by an RCN engineer who I believe was also in 

contact with NDS in this competition with Canal+. RCN asked us to 

justify why there was a piracy problem with our smart cards and told 

us that NDS had a much better solution and no piracy problem in 

Europe. RCN postponed their decision on selecting a supplier for a 

new end-to-end system, but I believe that the piracy problem caused 

confusion and created doubts at RCN about the performance and 

quality of Canal+’ products. 

Since then, Canal+ Technologies, Inc. has successfully won only one 

contract in the United States, WinFirst in Sacramento. As the piracy 

of MediaGuard became known, we have put management time and 

efforts into reassuring the customer. We had to set up a Security 

Committee and explain to the customer how to fight piracy, the legal 

actions taken in Europe, and the engineering steps that we would use 

and were using to combat piracy. These efforts would not have been 

needed if MediaGuard had remained secure. The security problems 

associated with our conditional access system[s] have had a negative 

impact on the sales efforts in the United States of Canal+ 

Technologies, Inc. based in Cupertino. [Emphasis added.] 

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142. In addition, on March 2, 2001, New Media Markets reported: 

Some estimates put the level of piracy as high as 30 per cent of the 

pay-television - subscriber base in Western Europe. 

* * * 

The impact of piracy was made clear last month by Spanish paytelevision group Sogecable, which runs both the Canal Satelite Digital 

digital-satellite platform and the Canal Plus Espana premium service. 

The company, which has just over two million subscribers, said that 

pirate cards were being used by between 100,000 and 300,000 homes 

in Spain. This is hurting the premium channel and pay-per-view 

services in particular. [Emphasis added.] 

143. Despite the foregoing, when Vivendi reported its results for the quarter ended 

March 31, 2002, the Company disclosed: 

Canal+ Premium Channel revenue fell 3% in the quarter because of 

lower advertising revenue and lower subscription revenue owing to 

lower average analogue subscribers. 

In truth and in fact, Canal Plus Premium Channel revenue was materially adversely affected by the 

undisclosed piracy of Canal Plus’ technology noted above. 

144. Moreover, although Defendants caused Vivendi to belatedly record goodwill 

impairments totaling € 16.6 billion in the first quarter of 2002 under U.S. GAAP -- after having 

taken no impairment charges under U.S. GAAP in FY 2001 -- defendants downplayed the 

significance of these write-offs by attributing them to the adoption of a new U.S. GAAP accounting 

standard, SFAS No. 142, under which impairment is principally evaluated by reference to cash flow 

impairment.(Pursuant to SFAS No.142, the fair value of a reporting unit is compared to its carrying 

amount. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting 

unit is considered not impaired. If the carrying amount of reporting unit’s goodwill exceeds the 

implied fair value of that goodwill (as defined), an impairment loss shall be recognized in an amount 

equal to that excess.) By delaying any recognition of goodwill impairment under U.S. GAAP until 

after Vivendi had adopted SFAS No. 142, Defendants avoided having to admit that Vivendi’s 

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expected cash flows from its acquisitions had been materially impaired well before its adoption of 

the new accounting standard. 

145. In addition, during 2000 and 2001, the world-wide economy suffered significant 

contraction and experienced a dramatic slowdown in the Internet, pay TV and telecommunications 

sectors. In fact, shortly after Vivendi issued its 2001 year end financial results, Moody’s downgraded 

Vivendi’s debt out of concerns about the Company’s ability to service its debt as it became due. 

146. Moreover, after Messier and Hannezo left the Company, Vivendi recorded an 

additional € 3.8 billion impairment in the value Canal Plus’ goodwill at the end of the first half of 

2002 under French GAAP, when Canal Plus actually reported revenue growth of 8% during this 

period. The fact that Vivendi’s new management took additional write-offs of goodwill at Canal 

Plus during a period when Canal Plus’ business was actually improving is further evidence that the 

impairment recorded in the value of Canal Plus’ goodwill in the second half of 2002 should have 

been taken earlier. 

147. The reported value of Canal Plus’ assets on Vivendi’s balance sheet was also 

materially and improperly inflated in other respects. For example, in 1999, Canal Plus entered into 

contracts with five French football (soccer) league clubs: Monaco, Lyon, Lens, Bordeaux and ParisSt. Germain. These agreements obligated Canal Plus to pay €250 million over the next five years for 

“marketing rights” related to those teams, and these rights were reported as assets in Vivendi’s 

financial statements. 

148. However, according to a January 29, 2001 memorandum that was prepared shortly 

after Vivendi acquired Canal Plus in December 2000, and that was reviewed by defendant Hannezo, 

the purported “marketing rights” had no economic benefit to Canal Plus because the rights primarily 

at issue turned out to belong to the football league, rather than to the individual clubs. The memo 

also stated that the contracts had not been properly authorized by Canal Plus’ board. The memo 

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further warned that, given the lack of economic benefit that could be documented in connection 

with these contracts, the contracts could put Vivendi in a “difficult” position with respect to the 

SEC and U.S. GAAP reporting requirements. 

149. Pursuant to U.S. GAAP, assets are probable future economic benefits obtained or 

controlled by a particular entity as a result of past transactions or events. See Concepts Statement 

No. 6. As described in the January 21, 2001 memorandum, however, there were no meaningful 

economic benefits flowing from these five accounts. 

150. Accordingly, the marketing rights in the amount €250 million, reported as assets in 

Vivendi’s financial statements were not bona fide “assets” at all, and were required to be written-off 

and charged to expense in Vivendi’s year-end financial statements for FY 2000 (which were filed 

with the SEC on July 2, 2001). Nonetheless, Vivendi improperly failed to do so in violation of U.S. 

GAAP. 

(ii) US Filter

151. Just as it did with Canal Plus, Vivendi also overstated its reported goodwill on its US 

Filter acquisition. For example, when Vivendi acquired US Filter, it paid approximately 46 times US 

Filter’s 1998 earnings. As a result, Vivendi recorded approximately €4.6 billion in goodwill on the 

US Filter acquisition. However, as Defendants knew or recklessly ignored, Vivendi’s reported 

goodwill on US Filter was materially inflated during the Relevant Period because, among other 

things (a) US Filter’s operating results were much less than reported by Vivendi as US Filter was 

falsely inflating its revenue, as noted below at ¶¶ 174-185, and (b) because companies comparable to 

US Filter were sold during the Relevant Period at prices significantly less than that paid by Vivendi. 

(For example, although Vivendi paid 46.5 times US Filter’s purported operating profit when Vivendi 

acquired it in September 1999, in 2001 the German conglomerate RWE purchased a comparable 

U.S. water utility, American Water, for only about 16 times earnings before interest and taxes). 

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These events and circumstances confirmed that US Filter’s goodwill was impaired under US GAAP 

prior to the fourth quarter of 2001. In the end, Vivendi recorded a staggering €2.6 billion 

impairment in the value of US Filter’s assets, but, in violation of U.S. GAAP, did not record this 

impairment until the end of the fourth quarter of 2001. 

152. After Vivendi’s board ousted Messier and Hannezo, Vivendi’s new management also 

implicitly admitted that the goodwill impairments that prior management had recognized for entities 

other than Canal Plus and US Filter were also insufficient. For example, on August 14, 2002, 

Vivendi reported additional goodwill impairments (exclusive of those pertaining to Canal Plus) 

totaling €7.2 billion on a French GAAP basis for the three months ended June 30, 2002. In 

contrast, the Company’s financial statements for the three months ended March 31, 2002 (prepared 

on a French GAAP basis) showed that no charge for goodwill impairment was recognized during 

the March 31, 2002 quarter. 

(b) Vivendi’s Improper Consolidation Of Investments 

153. Vivendi also improperly inflated its 1999, 2000 and 2001 revenues and operating 

income by consolidating certain investments in which the Company possessed less than a 50% 

ownership interest. 

154. Specifically, although Vivendi only owned a minority of the shares of the French 

telecommunications company Cegetal and the Moroccan telecommunications company Maroc 

Telecom, the complete results of Cegetal were included in Vivendi’s consolidated financial 

statements for 1999, 2000 and 2001 and the complete results of Maroc Telecom were included in 

Vivendi’s consolidated financials for 2001. 

155. In the footnotes to its 1999, 2000 and 2001 financial statements filed with the SEC 

on Form 20-F, Vivendi disclosed the full consolidation of the following companies: 

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OWNERSHIP INTEREST 

Name 1999 2000 2001 

Cegetel & Subsidiaries 44% 44% 44% 

Maroc Telecom - - 35% 

(See Vivendi’s 1999 20-F Pages 183-184; 2000 20-F Pages F39-F40; 2001 20-F Pages F48-F-49.) 

156. U.S. GAAP, in Accounting Research Bulletin (“ARB”) No. 51, provides: 

The purpose of consolidated statements is to present, primarily for 

the benefit of the shareholders and creditors of the parent company, 

the results of operations and the financial position of a parent 

company and its subsidiaries essentially as if the group were a single 

company with one or more branches or divisions. There is a 

presumption that consolidated statements are more meaningful than 

separate statements and that they are usually necessary for a fair 

presentation when one of the companies in the group directly or 

indirectly has a controlling financial interest in the other companies. 

157. ARB No. 51, as amended by FASB’s SFAS No. 94, also provides, in pertinent part, 

that: 

The usual condition for a controlling financial interest is ownership 

of a majority voting interest, and, therefore, as a general rule 

ownership by one company, directly or indirectly, of over fifty 

percent of the outstanding voting shares of another company is a 

condition pointing toward consolidation. 

158. In addition, the Emerging Issues Task Force (“EITF”) of the FASB has issued 

Abstract No. 96-16, which provides accounting guidance for when minority shareholders possess 

certain rights which may overcome the presumption that consolidation requires a majority voting 

interest in an investee. In this regard, EITF No. 96-16 provides, in pertinent parts: 

The Task Force believes that minority rights (whether granted by 

contract or by law) that would allow the minority shareholder to 

effectively participate in the following corporate actions should be 

considered substantive participating rights and would overcome the 

presumption that the investor with a majority voting interest should 

consolidate its investee: 

1. Selecting, terminating, and setting the compensation of 

management responsible for implementing the investee’s 

policies and procedures; and 

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2. Establishing operating and capital decisions of the investee, 

including budgets, in the ordinary course of business. 

The Task Force considered the above to be illustrative of substantive 

participating rights, not necessarily all-inclusive. The Task Force 

believes that the rights noted above are participating rights because, 

in the aggregate, the rights allow the minority shareholder to 

effectively participate in decisions that occur as part of the ordinary 

course of the investee’s business and are significant factors in 

directing and carrying out the activities of the business. Individual 

rights, such as the right to veto the termination of management 

responsible for implementing the investee’s policies and procedures, 

should be assessed based on the facts and circumstances to determine 

if they are substantive participating rights in and of themselves. 

However, minority rights that appear to be participating rights but 

that by themselves are not substantive (see “Factors to Consider” and 

Exhibit 96-16A) would not overcome the presumption of 

consolidation by the investor with a majority voting interest in its 

investee. The likelihood that the veto right will be exercised by the 

minority shareholder should not be considered when assessing 

whether a minority right is a substantive participating right. 

159. In addition, under French GAAP, exclusive control and the power to direct the 

financial and operational policies of an enterprise is required in order to consolidate results. 

Furthermore, French GAAP states that enterprises are excluded from consolidation where severe 

and long lasting restrictions substantially call into question the control or influence exercised over 

the enterprise. (See Regulation 99-02 Section 1002, 101.) 

160. Vivendi did not possess controlling financial interests in, at least, its Cegetel and 

Maroc Telecom subsidiaries and therefore should not have consolidated the financial statements of 

such companies with its own. In so doing, Vivendi overstated its reported revenue, operating 

income and EBITDA and inflated its reported growth rates throughout the Relevant Period. 

161. Consolidating the financial statements of these investments was critical to 

Defendants’ scheme because it allowed Vivendi to include all of the revenues and operating income 

from these investments in its financial results. Indeed, this accounting practice artificially and 

materially inflated Vivendi’s revenues and income because Vivendi did not possess control over such 

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investments nor did it have access to their reported cash. As a result, not only was Vivendi’s 

revenue and earnings inflated, its liquidity crisis was much worse than portrayed in the Company’s 

publicly filed financial statements. 

Cegetel

162. Vivendi stated in its December 31, 2000 20-F that: 

The Company consolidates Cegetel . . . in which it owns less than 

50% of the voting shares. The Company has a direct and indirect 

ownership interest in Cegetel totaling 44%. Cegetel is consolidated 

because, through a shareholders agreement, the Company has a 

majority of the shareholder voting rights. 

163. This statement and the consolidation of Cegetel’s 1999-2001 operating results were 

false and misleading because Vivendi only owned 44% of Cegetel shares and it did not have 

sufficient controlling financial interest in Cegetel. Indeed, the Shareholder Agreement between 

Vivendi and Cegetel, as described in Vivendi’s 2000 20-F, contained a key clause that blocked 

Vivendi from making operating and capital decisions in the ordinary course of Cegetel’s business. 

164. The clause states: 

- If all of BT, Mannesmann and Transtel dissent, we [Vivendi] cannot 

cause Cegetel Group to: 

- create or acquire shares in any entity in which Cegetel Group 

or companies it controls hold less than 100% of the shares 

and voting rights; or 

- subject to some exceptions, acquire, dispose of lease or loan a 

material amount of assets or significantly reduce or cease any 

material business operation. [Emphasis added.] 

165. Additionally, Vivendi lacked the necessary financial control of Cegetel for it to have 

access to Cegetel’s cash flow. When asked about the liquidity of the Company, Vivendi’s CEO JeanRene Fourtou admitted in a June 26, 2002 conference call that “we do not have access to Cegetel

and Maroc Telecom.” In an August 14, 2002 conference call with investors, Jean-Rene Fourtou 

also conceded that “Vivendi cannot access the cash flow generated by the Companies [of which] it 

owns less than 50%.” 

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166. It was not until after the Relevant Period, on December 3, 2002, that Vivendi 

announced that it would purchase sufficient number of shares to give it a majority stake in 

Cegetel, and to finally give Vivendi the necessary financial control over Cegetel’s cash flow. 

167. As a result of Vivendi improperly consolidating Cegetel’s financial statements, 

Vivendi’s reported revenues were overstated by € 3.9 billion, € 5.1 billion and € 6.4 billion for the 

years ended 1999, 2000, and 2001, respectively. This reported $16.8 billion in additional revenue 

impacted and misrepresented other financial metrics relied upon by investors, including Plaintiffs, 

namely, revenue growth and EBITDA. 

Maroc Telecom

168. Vivendi disclosed in its 2001 20-F that: 

In the course of the partial privatization of Maroc Telecom, Vivendi 

Universal was chosen to be a strategic partner in the purchase of an 

interest in Morocco’s national telecommunications operator for 

approximately €2.4 billion. The transaction was finalized in April 

2001, at which time Maroc Telecom began to be consolidated in the 

accounts of Vivendi Universal, as we obtained control through 

majority board representation and share voting rights. As a leader in 

Moroccan telecommunications, Maroc Telecom operates 1.2 million 

fixed lines, has 3.7 million GSM clients and generated revenues of 

approximately €1.4 billion in 2001. 

169. Vivendi also disclosed in its 2001 Form 20-F that no other shareholder or groups of 

shareholders exercise substantive participatory rights, which would allow them to vote or block 

decisions taken by Vivendi Universal. 

170. This disclosure and the consolidation of Maroc Telecom’s 2001 results were false 

and misleading because Vivendi only owned 35% of Maroc Telecom, and because the remaining 

65% was held by a single entity - the Moroccan government. The Moroccan government did not 

conduct its operations based on the views of Vivendi. 

171. Additionally, under French GAAP, at least a 40% ownership interest is required for 

consolidation (Regulation 1002), but Vivendi only had a 35% interest. 

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172. As with Cegetel, Vivendi lacked the necessary financial control of Maroc Telecom 

for it to have access to Maroc Telecom’s cash flow. When asked about the liquidity of the 

Company, Vivendi’s CEO Jean-Rene Fourtou admitted in a June 26, 2002 conference call that “we 

do not have access to Cegetel and Maroc Telecom.” [Emphasis added.] In an August 14, 2002 

conference call with investors, Jean-Rene Fourtou similarly stated that “Vivendi cannot access the 

cash flow generated by the companies it owns less than 50 percent of.” 

173. As a result of Vivendi improperly consolidating Maroc Telecom’s financial 

statements, Vivendi’s reported revenues were overstated by € 1.4 billion in 2001. 

(c) Vivendi’s Improper Recognition Of Revenue 

174. In furtherance of its scheme to inflate its operating performance, Vivendi, in 

violation of U.S. GAAP, improperly recognized revenue from, at least, its US Filter subsidiary. 

175. U.S. GAAP provides that revenue should not be recognized until it is realized or 

realizable and earned. FASB Concepts Statement No. 5, ¶ 83. The conditions for revenue 

recognition ordinarily are met when persuasive evidence of an arrangement exists, delivery has 

occurred or services have been rendered, the seller’s price is fixed or determinable, collectibility of 

the sales price is reasonably assured and when the entity has substantially performed the obligations 

which entitle it to the benefits represented by the revenue. Generally, revenue should not be 

recognized until the earnings process is complete. SEC Staff Accounting Bulletin (“SAB”) No. 101; 

Concept Statement Nos. 2 and 5; SFAS No. 48; ARB No. 43; APB Opinion No. 10; and SOP 97-2. 

176. In fact, the SEC’s SAB No. 101 specifically provides that: 

Supply or service transactions may involve the charge of a 

nonrefundable initial fee with subsequent periodic payments for 

future products or services. The initial fees may, in substance, be 

wholly or partly an advance payment for future products or services. 

In the examples above, the on-going rights or services being provided 

or products being delivered are essential to the customers receiving 

the expected benefit of the up-front payment. Therefore, the upfront fee and the continuing performance obligation related to the 

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services to be provided or products to be delivered are assessed as an 

integrated package. In such circumstances, the staff believes that upfront fees, even if nonrefundable, are earned as the products and/or 

services are delivered and/or performed over the term of the 

arrangement or the expected period of performance. [Emphasis 

added; footnotes omitted.] 

177. In its December 31, 2001 Form 20-F, the Company disclosed the following with 

respect to its accounting policy associated with the recognition of environmental service revenue: 

Revenues on public service contracts are recognized as services are 

provided. Amounts billed and collected prior to services being 

performed are included in deferred revenues. 

178. In violation of GAAP and its publicly disclosed revenue recognition policy, Vivendi, 

throughout the Relevant Period, improperly recognized anticipated revenue from multi-year public 

service contracts upon signing on the contracts. In so doing, Vivendi materially overstated its 

reported operating results during the Relevant Period in violation of U.S. GAAP and its publicly 

disclosed policy of revenue recognition. 

179. For example, according to a former officer of U.S. Filter, during the Relevant Period, 

Vivendi Environmental, through its U.S. Filter subsidiary, materially overstated its operating results 

by employing a practice internally referred to as “booking backlog.” Pursuant to such practice, US 

Filter improperly recognized and reported the entire dollar amount of long-term, fixed priced 

contracts as revenue upon the signing of the contract, and, according to a former officer of U.S. 

Filter, its revenue on major contracts was overstated due to such practice “by as much as 10 times.” 

Vivendi Environmental accounted for approximately 51% of Vivendi’s reported revenues and 

operating income during the year ended December 31, 2001, and its U.S. Filter subsidiary reported 

EURO 1.32 billion in total revenue in 2000. 

180. U.S. GAAP, in APB No. 22, ¶7, provides that the usefulness of financial statements 

in making economic decisions depends significantly upon the user’s understanding of the accounting 

policies followed by a company, and further states that information about the accounting policies 

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adopted by a reporting company is “essential” for financial statement users. (APB No. 22, ¶ 8) 

Accordingly, U.S. GAAP requires that financial statements identify and describe important 

judgments as to the appropriateness of principles relating to the recognition of revenue. (APB No. 

22, ¶ 12) 

181. During the Relevant Period, Vivendi materially inflated its operating results and 

violated its stated policy of revenue recognition and U.S. GAAP when it recognized and reported 

revenue on such transactions because the “revenue” was not earned, services were not rendered and 

the Company had not yet substantially performed the obligations which entitled it to the benefits 

represented by the revenue. In so doing, investors were uninformed about actual accounting 

policies that were “essential” to an informed investment decision. 

182. Indeed, Vivendi’s management directed or knowingly condoned and encouraged the 

process in which employees would improperly record revenue, thereby inflating reported revenue. 

Indeed, the term “booking to backlog” was a phrase that was widely used among US Filter 

personnel, and the phrase was even included in monthly reports given to the Executive Board of 

Vivendi Environmental. 

183. In addition to the accounting improprieties stated above, Vivendi presented its 

financial statements during the Relevant Period in a manner which also violated at least the 

following provisions of GAAP: 

(i) The concept that financial reporting should provide information that 

is useful to present and potential investors and creditors and other users in making rational 

investment, credit and similar decisions (Concepts Statement No. 1, ¶ 34); 

(ii) The concept that financial reporting should provide information 

about the economic resources of an enterprise, the claims to those resources, and the effects of 

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transactions, events and circumstances that change resources and claims to those resources 

(Concepts Statement No. 1, ¶40); 

(iii) The concept that financial reporting should provide information 

about how management of an enterprise has discharged its stewardship responsibility to owners 

(stockholders) for the use of enterprise resources entrusted to it. To the extent that management 

offers securities of the enterprise to the public, it voluntarily accepts wider responsibilities for 

accountability to prospective investors and to the public in general (Concepts Statement No. 1, 

¶ 50); 

(iv) The concept that financial reporting should provide information 

about an enterprise’s financial performance during a period. Investors and creditors often use 

information about the past to help in assessing the prospects of an enterprise. Thus, although 

investment and credit decisions reflect investors’ expectations about future enterprise performance, 

those expectations are commonly based at least partly on evaluations of past enterprise performance 

(Concepts Statement No. 1, ¶ 42); 

(v) The concept that financial reporting should be reliable in that it 

represents what it purports to represent. That information should be reliable as well as relevant is a 

notion that is central to accounting (Concepts Statement No. 2, ¶¶58, 59); 

(vi) The concept of completeness, which means that nothing is left out of 

the information that may be necessary to ensure that it validly represents underlying events and 

conditions (Concepts Statement No. 2, ¶ 79); 

(vii) The concept that conservatism be used as a prudent reaction to 

uncertainty to try to ensure that uncertainties and risks inherent in business situations are adequately 

considered. The best way to avoid injury to investors is to try to ensure that what is reported 

represents what it purports to represent (Concepts Statement No. 2, ¶¶ 95, 97). 

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184. The foregoing accounting improprieties caused Vivendi to issue financial statements 

that materially falsified its financial performance to the detriment of unsuspecting investors – 

including Plaintiffs – and further masked the problems the Company was experiencing during the 

Relevant Period. In filing financial statements with the SEC which did not conform to the 

requirements of U.S. GAAP, the Defendants repeatedly disseminated financial statements of 

Vivendi which were presumptively misleading and inaccurate. The accounting machinations detailed 

herein further evidence the Defendants’ intent to deceive investors during the Relevant Period and 

misrepresent the truth about the Company and its business, operations and financial performance to 

detriment of those who relied on them. 

185. The Company’s Relevant Period annual and interim financial statements filed with 

the SEC were also materially false and misleading in that they failed to disclose known trends, 

demands, commitments, events, and uncertainties that were reasonably likely to have a materially 

adverse effect on the Company’s liquidity, net sales, revenues and income from continuing 

operations. 

DEFENDANTS’ FAILURE TO DISCLOSE MATERIAL ADVERSE FACTS

CONCERNING VIVENDI’S SEVERE LIQUIDITY PROBLEMS

186. For the reasons set forth in the immediately preceding paragraphs, Defendants 

materially overstated Vivendi’s financial performance during the Relevant Period in violation of 

GAAP. 

187. However, during the Relevant Period, Defendants also repeatedly made material 

misstatements and omissions concerning the Company’s liquidity. Unbeknownst to Plaintiffs, 

investors or the financial markets, and contrary to Defendants’ repeated assurances that the 

Company was in strong financial condition, Vivendi’s implementation of its growth-by-acquisition 

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strategy caused it to overpay for businesses and saddled the Company with a huge debt burden that 

the operations of the acquired businesses could not satisfy. 

188. As a result, Vivendi was under great strain to meet its obligations in the ordinary 

course as they came due. The causes of Vivendi’s liquidity problems included the following: 

(a) Inability to generate expected cash flows from acquired companies. 

As set forth in detail above in the section discussing Vivendi’s failure to timely recognize 

impairments to goodwill (see ¶¶ 124-152), cash flows from a number of Vivendi’s largest acquisitions 

(including, inter alia, Canal Plus, Universal and U.S. Filter) fell dramatically short -- by billions of 

dollars -- of meeting the implied cash flow expectations that would have been necessary to justify 

Vivendi’s publicly reported valuation of its “goodwill.” Indeed, as described generally above, 

Vivendi’s financial performance fell sufficiently short of the expectations that Defendants had 

fostered during the Relevant Period that Defendants caused Vivendi to engage in a variety of other 

GAAP violations to conceal the Company’s actual results. 

(b) Vivendi’s Undisclosed 2001 Stock Buybacks. Further exacerbating 

Vivendi’s cash flow situation was defendant Messier’s undisclosed and massive stock buy-back 

program, which -- unbeknownst to Plaintiffs and investors -- caused the Company to spend 

approximately $6.3 billion of the Company’s cash on acquiring Vivendi shares. As later reported in 

the Wall Street Journal on October 31, 2002: 

Mr. Messier, a former top investment banker with Lazard LLC, was 

famously fond of deal making. But now it turns out he pursued 

many more deals than has been publicly known. More important, he 

spent billions of dollars buying back Vivendi stock on the market last 

year without consulting his CFO or the board, according to people 

familiar with the situation. Trying to prop up the stock price, he 

instead only sent Vivendi’s debt soaring.

* * * 

The board signed off on Mr. Messier’s acquisitions. But it did so 

without knowing the full extent of his spending spree, current and 

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former board members say. That is because Mr. Messier didn’t tell 

the board about his single biggest expenditure: the purchase of 104 

million Vivendi shares, or nearly 10% of the company’s equity, on the 

stock market during 2001. His purpose was to prop up the share 

price. The cost: $6.3 billion. 

Shareholders had earlier approved a resolution allowing Vivendi to 

buy back up to 10% of its shares. But current and former directors 

say they expected to hear beforehand about such massive purchases. 

* * * 

Mr. Hannezo opposed the stock purchases as a waste of cash . . . . 

This resulted in Mr. Messier trying to circumvent his CFO on the 

buybacks. The ex-chairman placed his stock orders by phone with 

two mid-level employees in the finance department, Hubert Dupont 

Lhotelain and Francois Blondet, according to a person familiar with 

the matter . . . . 

In early December 2001, the CFO finally intervened by forbidding 

his subordinates to take Mr. Messier’s phone calls, the person familiar 

with the situation says Mr. Hannezo set up a formal process to slow 

Mr. Messier down, requiring that the chairman request buybacks in 

writing, along with some justification. 

* * * 

By December, the buybacks had taken their toll: Vivendi was running 

out of cash, according to Mr. Hannezo’s memo to the COB. 

[Emphasis added.] 

(c) Undisclosed Off Balance Sheet Liabilities. During the Relevant Period, 

Defendants also misled investors about an off-balance sheet liability that further threatened 

Vivendi’s liquidity and ultimately cost Vivendi hundreds of millions of dollars and impaired 

Vivendi’s liquidity crisis. In late 2000 and 2001, Defendants wagered on the future success of the 

Company by selling put options to raise cash to fund executive compensation. These put options 

obligated Vivendi to purchase in the future at least 22.8 million of its own shares, or approximately 

2% of all outstanding Vivendi stock, at an average price of € 69. Even as Vivendi’s share price 

dropped during 2001 and the first half of 2002, making it increasingly likely that the Company would 

take a large loss on the options, Defendants continued to conceal the true nature and extent of these 

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liabilities, and to misrepresent Vivendi’s true liquidity condition. Moreover, even when Defendants 

finally made limited disclosures of its put obligations in the spring of 2002, the disclosures were 

woefully inadequate. For example: 

(i) After being criticized by the French press for concealing the risk 

connected to the options, Vivendi claimed that defendant Hannezo went over the put options with 

analysts at an accounting workshop March 6, 2002 in Paris. However, as the May 1, 2002 edition of 

The Wall Street Journal reported, “analysts who were present or listened in said Vivendi glossed 

over the issue,” [Emphasis added] and Vivendi admitted that discussion of the puts was “easy to 

miss” at the accounting workshop. Moreover, the slide presentation from this workshop, belatedly 

filed with the SEC as an exhibit to Vivendi’s May 2, 2002 Form 6-K did not mention Vivendi’s put 

obligations. 

(ii) On April 15, 2002, Vivendi disseminated its annual report on Form 

6-K for FY 2001 which contained a translation of its 2001 year end financial statements. This 

translation also made only vague reference to Vivendi’s put obligations: 

In connection with the sale of puts on its shares, Vivendi Universal 

had a commitment, at December 31, 2001, to buy 19.7 million shares 

at exercise prices ranging from €60.40 to €80.00 in 2002 and 3.1 

million shares at an exercise price of €50.50 in January 2003. 

Vivendi’s annual report therefore did little to clarify the details of Vivendi’s risks and obligations in 

connection with the put options. For example, other than specifying that Vivendi could be forced 

to purchase 3.1 million shares in January 2003, the report failed to inform investors of the scope, if 

any, of the Company’s obligations with respect to the puts after December 31, 2001. The report 

also failed to comment on whether the options were likely to be exercised given the decline in 

Vivendi’s stock price, or their potential adverse impact on Vivendi’s liquidity. 

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(iii) On April 18, 2002 (as later reported by the May 1, 2002 Wall Street 

Journal) Laura Martin, who heads Vivendi’s investor-relations departments, sent an e-mail to selected 

analysts that purported to clarify Vivendi’s obligations with respect to the put options: 

In a sign that Vivendi itself was conscious it hadn’t made clear 

enough the consequences of the put options, Laura Martin, who 

heads the company’s investor-relations department, sent an e-mail to 

four analysts on April 18 spelling the put options out clearly. 

In the e-mail, Ms. Martin said Vivendi had 18 million put options 

outstanding that the company sold to undisclosed parties for 12 

euros each and that carry an exercise price of 69 euros. She 

estimated the impact on the company’s balance sheet at 50 million 

euros to 1.2 billion euros. The e-mail went on to say that, though 

previously raised at the [March 6, 2002] accounting workshop, the 

put options “were easy to miss.” 

Still, Martin’s “selective disclosure” failed to state the timetable for Vivendi’s future obligations, 

preventing analysts and investors from making a reasonable assessment with regard to Vivendi’s 

cash flow for the immediate future. In addition, Ms. Martin’s range of potential liability was 

rendered meaningless by its impossibly large scope and failure to reference when the obligation 

would come due. 

(iv) It was therefore not until May 28, 2002, in its Form 20-F for the year 

ending 2001, that Vivendi began to inform investors about its true potential adverse effects ensuing 

from the put options: 

Except for one put sold in 1998, Vivendi Universal in 2001 sold puts 

to banks on 19.7 million ordinary shares at exercise prices ranging 

from €60.40 to €80.00 in 2002 and 3.1 million ordinary shares at an 

exercise price of €50.50 in January 2003. As of April 30, 2002, 

approximately 16 million of these puts remain outstanding.... 

Vivendi Universal’s contingent liability relating to these puts is 

approximately €1.1 billion to settle the 16 million puts outstanding 

for cash at an average of €69 per put and approximately €540 million 

to settle the 16 million puts outstanding for cash by paying the banks 

the difference between the average of €69 per put and the market 

price per ordinary share of Vivendi Universal as of April 30, 2002. 

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A later June 7, 2002 article in the Economist reported that Hannezo had confirmed that Vivendi was 

using cash each month to buy out the costly put options. 

(v) In its 2002 half year financial statements released August 14, 2002, 

Vivendi disclosed the impact its put obligations had during the first six months of 2002 alone: 

As at June 30, 2002 and December 31, 2001, Vivendi Universal had 

outstanding obligations on 13.9 million and 22.8 million shares 

respectively. The average exercise prices were €69 and €70 

respectively, giving a potential commitment of €953 million and 

€1,597 million respectively. These put options are only exercisable 

on the specific date of the option and expire at various dates during 

2002 and the first quarter of 2003. 

* * * 

The cost to Vivendi Universal during the first half of 2002 by option 

holders exercising their rights amounted to €239 million. 

The Magnitude of the Undisclosed Liquidity Problem

189. As subsequently reported by the Wall Street Journal in an article entitled “How 

Messier Kept Cash Crisis at Vivendi Hidden For Months: Media Giant Was At Risk Well Before 

Investors Knew” and dated October 31, 2002, Vivendi’s acquisition spree, together with the other 

factors referenced in the preceding paragraphs, had put Vivendi on the brink of catastrophe: 

On Dec. 13, [2001], Guillaume Hannezo sent Jean-Marie Messier, 

chairman of Vivendi Universal SA, a desperate handwritten plea. 

“I’ve got the unpleasant feeling of being in a car whose driver is 

accelerating in the turns and that I’m in the death seat,” wrote Mr. 

Hannezo, the company’s chief financial officer. “All I ask is that all 

of this not end in shame.” 

That very day, unknown to investors and the Vivendi board, the 

company had narrowly averted a downgrade by credit-rating agencies, 

which would have made it difficult to borrow money and plunged the 

company into a cash crisis. Mr. Hannezo (pronounced AN-ZO) 

implored his boss and longtime friend to take serious steps to reduce 

Vivendi’s ballooning debt. 

When the company’s board met the next day to consider whether to 

approve a roughly $10 billion acquisition of USA Networks Inc.’s TV 

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and film businesses, Mr. Messier made no mention of the close call 

with the rating agencies. Instead, when a director asked about 

Vivendi’s financial profile, Mr. Messier said the company had no 

problem, according to two directors who were there. 

The board endorsed the USA Networks deal, buying Mr. Messier’s 

pitch that it would help complete Vivendi’s transformation from a 

onetime water utility into an entertainment giant. He boasted that 

the company would be able to distribute the movies and music made 

by its Universal Studios and Universal Music units by means of 

cellular devices, as well as by satellite, cable and pay television. 

But Vivendi was already in dire financial straits. The USA Networks 

deal, along with a $1.5 billion investment in satellite-TV operator 

EchoStar Communications Corp., in fact signaled the beginning of 

the end for Mr. Messier. The boy wonder of the French business 

establishment was ousted seven months later in July, after directors 

discovered the company was skirting close to a bankruptcy filing. 

As new management struggles to salvage the French conglomerate, it 

has become clear that Vivendi came close to financial disaster far 

earlier than previously thought. That picture is starkly at odds with 

the one repeatedly presented by Mr. Messier to investors and his 

board. [emphasis added] 

190. Similarly, citing an article first appearing in Le Monde, Bloomberg reported on 

May 14, 2002 that Vivendi was close to insolvency at the end of 2001: 

Vivendi Universal SA, the world’s second-largest media company, 

was close to insolvency at the end of 2001 after delays in planned 

asset sales, French daily Le Monde said, without citing anyone. 

Delays in the sale of the Seagram liquor unit and a French magazine 

business caused a “serious cash crisis” at the Paris-based company, 

which faced payments of about 10 billion euros ($9 billion) at the end 

of last year, the paper said. Today, Vivendi’s businesses “barely 

produce the cash needed to pay the bills,” according to the report.... 

Vivendi’s cash woes help explain why the company sold 55 million of 

its own shares in January, 9 percent of Vivendi Environnement SA, 

as well as its stake in AOL Europe and British Sky Broadcasting Plc, 

Le Monde said. Since the beginning of the year, Vivendi shares have 

lost half their value. 

191. Although Defendants’ denied any pending liquidity crisis in response to the Le Monde

report and reassured investors during the spring and early summer of 2002 that Vivendi could meet 

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its obligations for the next 12 months, in reality the Company continued to teeter on the edge of 

bankruptcy. 

192. Similarly, on September 27, 2002, the AFX News reported: 

Vivendi Universal chairman Jean-Rene Fourtou said the company 

would have been forced to declare bankruptcy within 10 days if JeanMarie Messier had not resigned, according to a report in Le Figaro. 

193. On December 13, 2002, the Associated Press reported, based on an article first 

appearing in Le Monde, that defendant Hannezo admitted that 2001 was marked by a series of errors, 

including underestimating the debt problem: 

Electronic mail seized in an investigation of alleged financial 

irregularities at Vivendi Universal and other documents show 

escalating tension amid a growing debt crisis that led to the fall of 

flamboyant Chairman, Jean-Marie Messier. 

Board member Edgar Bronfman Jr. of Canada’s Seagrams empire, 

which was purchased by Vivendi in 2000, warned Messier in an email that he could be courting danger with his “very costly personal 

shows,” according to Friday’s edition of the newspaper Le Monde. 

And former Financial Director Guillaume Hannezo, in a note to 

France’s stock exchange watchdog, said Messier had turned Vivendi 

into a “permanent deal machine,” while an “urban guerrilla 

atmosphere” gripped a divided board, the newspaper said. 

* * * 

Hannezo, the former finance director, said in his 20-page report to 

the COB that 2001 was marked by the “accumulation of a series of 

errors,” including underestimating that the debt problem, according 

to Le Monde. 

* * * 

Hannezo, a key figure in the COB investigation, speculated that 

Vivendi could have been spared its debt mountain in 2001 “had it 

resolved to sell before buying . . . . Unfortunately, it oriented itself 

toward the inverse choice, satisfying itself with potential riches,” he 

wrote. Vivendi’s shares have tumbled around 75 percent this year. 

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ADDITIONAL SCIENTER ALLEGATIONS

194. As alleged herein, Defendants acted with scienter in that Defendants knew or 

recklessly disregarded that the public documents and statements issued or disseminated in the name 

of the Company were materially false and misleading; knew or recklessly disregarded that such 

statements or documents would be issued or disseminated to the investing public, including 

Plaintiffs; and knowingly and substantially participated or acquiesced in the issuance or 

dissemination of such statements or documents as primary violations of the federal securities laws. 

As set forth elsewhere herein in detail, Defendants, by virtue of their receipt of information 

reflecting the true facts regarding Vivendi, their control over, and/or receipt and/or modification of 

Vivendi’s allegedly materially misleading misstatements and/or their associations with the Company 

which made them privy to confidential proprietary information concerning Vivendi, were active and 

culpable participants in the fraudulent scheme alleged herein. Defendants knew and/or recklessly 

disregarded the falsity and misleading nature of the information which they caused to be 

disseminated to the investing public. Indeed, defendant Messier stated on December 6, 2000: 

“We are an Old World conglomerate that has grown by five times,” 

says Messier with obvious pride. “You don’t do that without 

concentrating on margins day by day. At the same time we have 

reshaped the group and managed it on a day-to-day basis, the French 

executive explained recently at a conference organised in London by 

bankers Goldman Sachs.” 

195. On May 31, 2002, it was reported that Vivendi’s board established a corporategovernance committee to monitor Messier’s strategic and financial decisions. According to The 

National Post on May 31, 2002, “[t]he move is an embarrassing comedown for Mr. Messier, who once 

boasted he did not have to answer to anyone.” The ongoing fraudulent scheme described herein 

could not have been perpetrated during the Relevant Period without the knowledge and complicity 

or, at least, the reckless disregard of the personnel at the highest levels of the Company, including 

the Individual Defendants. 

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196. Each Defendant possessed substantial motives for misrepresenting Vivendi’s 

financial status, operations, and prospects throughout the Relevant Period. The Company’s ability 

to maintain positive credit ratings, and, therefore, its ability to obtain additional financing in the 

future were dependent on Defendants’ fraudulent scheme. Defendants were further motivated to 

conceal the adverse facts detailed herein in order to acquire other companies using Vivendi’s 

artificially inflated shares. For example, during the Relevant Period, in addition to consummating 

the Seagram and Canal Plus acquisitions in late 2000 for a combined total of $46 billion in Vivendi 

common stock and ADSs, during the Relevant Period Vivendi also financed (or partially financed), 

its acquisitions of, at least, USA Networks (at least $1.65 billion of the purchase price with Vivendi 

stock), MP3.com and Multithematiques using Vivendi’s artificially inflated stock as currency.5

197. Defendants were further motivated to boost Vivendi’s share price because Messier 

made a huge bet that Vivendi shares would rise by selling put options to banks in late 2000 and 

2001. The options committed Vivendi to buy back tens of millions of its shares at fixed prices in 

the future. On October 31, 2002, The Wall Street Journal discussed Messier’s stock buy-backs and 

sales of put options: 

Mr. Messier had a special incentive to boost Vivendi’s share price 

with the buy-backs: He had made a massive bet on the company’s 

behalf that Vivendi shares would rise by selling “put options” to 

banks in late 2000. The options committed Vivendi to buy back tens 

of millions of its shares at fixed prices in the future. If Vivendi’s 

share price were to fall, the company could lose as much as $1.4 

billion on the options. Even with the buy-backs, the share price fell 

in the end. So far, the put options have cost Vivendi $900 million. 

198. Defendant Messier was also given a bonus for boosting Vivendi’s EBITDA by more 

than 30 percent in 2001. On June 6, 2002, it was reported in the New York Post: 

 

5 Although Vivendi engaged in literally dozens of other acquisitions during the Relevant Period, the terms of 

those transactions were typically not disclosed in detail. Accordingly, the number of Vivendi acquisitions financed in 

whole or in part with inflated Vivendi common stock may well be greater than the foregoing list suggests. 

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Vivendi Universal Chairman and Chief Executive Officer Jean-Marie 

Messier, despite the sorry state of his company’s stock, was given a 

bonus of more than $3 million for meeting an earnings goal, a filing 

with the Securities and Exchange Commission said. 

Messier was given the bonus, two-and-a-half times his salary, for 

boosting earnings before interest, taxes, depreciation and 

amortization by more than 30 percent in 2001. Had earnings risen 

more than 35 percent, Messier would have received three times his 

base salary as a bonus. 

Messier earned $4.8 million in bonus and salary for 2001. The 

chairman also got 835,000 stock options. 

199. Upon information and belief, Hannezo’s bonus payments were also dependant upon 

Vivideni’s EBITDA.6

 For this reason, the SEC Settlement, described above, required Hannezo to 

disgorge more than $140,000 in bonus payments. 

APPLICABILITY OF PRESUMPTION OF RELIANCE:

FRAUD-ON-THE-MARKET DOCTRINE

200. Pursuant to-their claims under Section 10(b) of the Exchange Act and Rule 10b-5 

thereunder, Plaintiffs will rely, in part, upon the presumption of reliance established by the fraud-onthe-market doctrine such that: 

(a) Defendants made public misrepresentations or failed to disclose material 

facts during the Relevant Period; 

(b) the omissions and misrepresentations were material; 

(c) the securities of the Company traded in a open and efficient markets; 

(d) the misrepresentations and omissions alleged would tend to induce a 

reasonable investor to misjudge the value of the Company’s securities; and 

 

6 “The company even bases its bonus scheme for top management on ebitda.” Economist, June 8, 2002. 

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(e) Plaintiffs purchased or otherwise acquired their Vivendi securities between 

the time Defendants failed to disclose or misrepresented material facts and the time the true facts 

were disclosed, without knowledge of the omitted or misrepresented facts. 

201. At all relevant times, the market for Vivendi’s securities was an efficient market for 

the following reasons, among others: 

(a) Vivendi’s ordinary shares actively traded on the Paris Bourse and Vivendi’s 

American Depositary Shares met the requirements for listing, and were listed and actively traded on 

the NYSE, a highly efficient market; 

(b) As a regulated issuer, Vivendi filed periodic public reports with the SEC and 

the COB (now AMF); 

(c) Vivendi regularly communicated with public investors via established market 

communication mechanisms, including through regular dissemination of press releases on the 

national circuits of major newswire services and through other wide-ranging public disclosures, such 

as communications with the financial press and other similar reporting services; and 

(d) Vivendi was followed by several securities analysts employed by major 

brokerage firms who wrote reports which were distributed to the sales force and certain customers 

of their respective brokerage firms. Each of these reports was publicly available and entered the 

public marketplace. 

202. As a result of the foregoing, the market for Vivendi’s securities promptly digested 

current information regarding Vivendi from all publicly available sources and reflected such 

information in Vivendi’s stock price. Under these circumstances, all purchasers of Vivendi’s 

ordinary shares and ADSs during the Relevant Period, including Plaintiffs, suffered injury through 

their purchase of Vivendi’s securities at artificially inflated prices, and a presumption of reliance 

applies. 

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INAPPLICABILITY OF STATUTORY SAFE HARBOR

203. The statutory safe harbor provided for forward-looking statements under certain 

circumstances does not apply to any of the allegedly false statements pleaded in this Complaint. The 

statements alleged to be false and misleading herein all relate to then-existing facts and conditions. 

Moreover, the specific statements pleaded herein were not identified as “forward-looking 

statements” when made. To the extent that any of the statements identified herein as materially 

false and misleading are held by the Court to be forward-looking statements, there were no 

meaningful cautionary statements identifying important then-present factors that could, and indeed 

did, cause actual results to differ materially from those in the purportedly forward-looking 

statements. Alternatively, to the extent that the statutory safe harbor does apply to any forwardlooking statements pleaded herein, Defendants are liable for those materially false forward-looking 

statements because at the time each of those forward-looking statements was made, the particular 

speaker knew that the particular forward-looking statement was false, and/or the forward-looking 

statement was authorized and/or approved by an executive officer or director of Vivendi who knew 

that those statements were false when made. 

LOSS CAUSATION

204. During the Relevant Period, the price of Vivendi ordinary shares and ADSs were 

artificially inflated as a result of Defendants’ false and misleading statements and omissions of 

material facts. When the truth was revealed, in whole or in part, the price of Vivendi ordinary shares 

and ADSs fell and caused Plaintiffs to sustain damages and economic losses. Accordingly, 

Plaintiffs’ damages and economic losses were proximately caused by the corrective disclosures and 

subsequent drop in the price of Vivendi ordinary shares and ADSs set forth in detail above. 

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COUNT I 

Violations Of Section 11 Of 

The Securities Act Against All Defendants

205. Plaintiffs repeat and reallege each of the foregoing paragraphs as if fully set forth 

herein, except to the extent any allegations above contain any facts which are unnecessary or 

irrelevant for purposes of stating a claim under this Section, including allegations that may be 

interpreted to sound in fraud or relating to any state of mind on the part of Defendants other than 

strict liability or negligence. 

206. This Count is brought pursuant to Section 11 of the Securities Act, 15 U.S.C. § 77k, 

against all Defendants. This Count does not sound in fraud. 

207. The Registration Statement in connection with the Merger, was inaccurate and 

misleading, contained untrue statements of material facts (including but not limited to, false financial 

results), omitted to state other facts necessary to make the statements made not misleading, and 

concealed and failed adequately to disclose material facts as described above. 

208. Vivendi is the registrant for the shares issued in connection with the Merger. The 

Individual Defendants were responsible for the contents and dissemination of the Registration 

Statement issued in connection with the Merger and caused it to be filed with the SEC. Each of the 

Individual Defendants signed the Registration Statement. 

209. Plaintiffs acquired Vivendi ordinary shares and ADSs issued in exchange for their 

Vivendi SA shares and their Seagram shares pursuant to the Merger. 

210. None of the Defendants made a reasonable investigation or possessed reasonable 

grounds for the belief that the statements contained in the Registration Statement and the 

Prospectus were true and without omissions of any material facts and were not misleading. Each of 

the Defendants acted negligently in issuing the Registration Statement and Prospectus. 

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211. Defendants issued, caused to be issued, and participated in the issuance of materially 

false and misleading written statements to the investing public which were contained in the 

Registration Statement, which misrepresented or failed to disclose, inter alia, the facts set forth 

above. By reasons of the conduct herein alleged, each Defendant violated, and/or controlled a 

person who violated, Section 11 of the Securities Act. 

212. At the times they acquired Vivendi ordinary shares and ADSs Plaintiffs were without 

knowledge of the facts concerning the wrongful conduct alleged herein and could not have 

reasonably discovered those facts. 

213. As a result of the foregoing, Plaintiffs have sustained damages. The value of Vivendi 

ordinary shares and ADSs have declined substantially subsequent to and due to Defendants’ 

violations. 

COUNT II 

Violations Of Section 12(a)(2) Of 

The Securities Act Against All Defendants

214. Plaintiffs repeat and reallege each of the foregoing paragraphs as if fully set forth 

herein, except to the extent any allegations above contain any facts which are unnecessary or 

irrelevant for purposes of stating a claim under this Section, including allegations that may be 

interpreted to sound in fraud or relating to any state of mind on the part of defendants other than 

strict liability or negligence. 

215. This Count is brought pursuant to Section 12(a)(2) of the Securities Act, 15 U.S.C. 

§ 77l(a)(2), against all Defendants. This Count does not sound in fraud. 

216. Defendants were sellers and offerors of the shares offered pursuant to the 

Prospectus. 

217. The Prospectus contained untrue statements of material facts, omitted to state other 

facts necessary to make the statements made not misleading, and concealed and failed to disclose 

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material facts. Defendants’ actions of solicitation included participating in the preparation of the 

false and misleading Prospectus. 

218. Defendants were obligated to make a reasonable and diligent investigation of the 

statements contained in the Prospectus, to ensure that such statements were true and that there was 

no omission to state a material fact required to be stated in order to make the statements contained 

therein not misleading. The Defendants in the exercise of reasonable care should have known of 

the misstatements and omissions contained in the Prospectus as set forth above. 

219. Plaintiffs acquired Vivendi ordinary shares and ADSs pursuant to the defective 

Prospectus. Plaintiffs did not know, or in the exercise of reasonable diligence could not have 

known, of the untruths and omissions contained in the Prospectus. 

220. By reason of the conduct alleged herein, Defendants violated, and/or controlled a 

person who violated, Section 12(a)(2) of the Securities Act. Accordingly, Plaintiffs are entitled to 

damages pursuant to Section 12(a)(2). 

COUNT III 

Violation Of Section 15 Of The Securities Act 

Against The Individual Defendants

221. Plaintiffs repeat and reallege each of the foregoing paragraphs as if fully set forth 

herein, except to the extent any allegations above contain any facts which are unnecessary or 

irrelevant for purposes of stating a claim under this Section, including allegations that may be 

interpreted to sound in fraud or relating to any state of mind on the part of Defendants other than 

strict liability or negligence. 

222. This Count is brought pursuant to Section 15 of the Securities Act, 15 U.S.C. § 77o, 

against the Individual Defendants. This Count does not sound in fraud. 

223. Each Individual Defendant was a control person of Vivendi by virtue of their 

position as directors and/or senior officers of the Company. The Individual Defendants each had a 

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series of direct and/or indirect business and/or personal relationships with other directors and/or 

major shareholders of Vivendi. 

224. Vivendi, as issuer of the Registration Statement, is liable under Section 11. Each 

Individual Defendant was a culpable participant in the violations of Sections 11 and 12(a)(2) of the 

Securities Act alleged in Counts I and II above, based on their having signed the materially false and 

misleading Registration Statement and having otherwise participated in the Merger. 

COUNT IV 

Violations of Section 10(b) of the Exchange Act and 

Rule 10b-5 Promulgated Thereunder Against All Defendants

225. Plaintiffs repeat and reallege each and every allegation contained in the foregoing 

paragraphs as if fully set forth herein. This Count is asserted against all Defendants for violations of 

Section 10(b) of the Exchange Act, 15 U.S.C. §78j(b), and Rule 10b-5 promulgated thereunder. 

226. During the Relevant Period, Defendants carried out a plan, scheme and course of 

conduct which was intended to and, throughout the Relevant Period, did: (i) deceive the investing 

public, including Plaintiffs, as alleged herein; (ii) enable Vivendi to complete several acquisitions, as 

described herein, using its artificially inflated securities as currency; and (iii) cause Plaintiffs to 

purchase Vivendi’s securities at artificially inflated prices. In furtherance of this unlawful scheme, 

plan and course of conduct, Defendant Vivendi and the Individual Defendants, and each of them, 

took the actions set forth herein. 

227. Defendants (a) employed devices, schemes, and artifices to defraud; (b) made untrue 

statements of material fact and/or omitted to state material facts necessary to make the statements 

not misleading; and (c) engaged in acts, practices, and a course of business which operated as a fraud 

and deceit upon the purchasers of the Company’s securities in an effort to maintain artificially high 

market prices for Vivendi’s ADSs and ordinary shares in violation of Section 10(b) of the Exchange 

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Act and Rule 10b-5. All Defendants are sued either as primary participants in the wrongful and 

illegal conduct charged herein or as controlling persons as alleged below. 

228. Defendants, individually and in concert, directly and indirectly, by the use, means or 

instrumentalities of interstate commerce and/or of the mails, engaged and participated in a 

continuous course of conduct to conceal adverse material information about the business, 

operations and future prospects of Vivendi as specified herein. 

229. Defendants employed devices, schemes and artifices to defraud, while in possession 

of material adverse non-public information and engaged in acts, practices, and a course of conduct 

as alleged herein in an effort to assure investors of Vivendi’s value and performance and continued 

substantial growth, which included the making of, or the participation in the making of, untrue 

statements of material facts and omitting to state material facts necessary in order to make the 

statements made about Vivendi and its business operations and future prospects in the light of the 

circumstances under which they were made, not misleading, as set forth more particularly herein, 

and engaged in transactions, practices and a course of business which operated as a fraud and deceit 

upon the purchasers of Vivendi ordinary shares and ADSs during the Relevant Period. 

230. Each of the Individual Defendants’ primary liability, and controlling person liability, 

arises from the following facts: (i) the Individual Defendants were high-level executives and/or 

directors at the Company during the Relevant Period and members of the Company’s management 

team or had control thereof; (ii) each of the Individual Defendants, by virtue of his responsibilities 

and activities as a senior officer and/or director of the Company was privy to and participated in the 

creation, development and reporting of the Company’s internal budgets, plans, projections and/or 

reports; (iii) each of the Individual Defendants enjoyed significant personal contact and familiarity 

with the other defendants and was advised of and had access to other members of the Company’s 

management team, internal reports and other data and information about the Company’s finances, 

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operations, and sales at all relevant times; and (iv) each of the Individual Defendants was aware of 

the Company’s dissemination of information to the investing public which they knew or recklessly 

disregarded was materially false and misleading. 

231. Defendants had actual knowledge of the misrepresentations and omissions of 

material facts set forth herein, or acted with reckless disregard for the truth in that they failed to 

ascertain and to disclose such facts, even though such facts were available to them. Such 

Defendants’ material misrepresentations and/or omissions were done knowingly or recklessly and 

for the purpose and effect of concealing Vivendi’s operating condition and future business 

prospects from the investing public and supporting the artificially inflated price of its securities. As 

demonstrated by Defendants’ misstatements of the Company’s business, financial condition, 

operations and growth throughout the Relevant Period, defendants, if they did not have actual 

knowledge of the misrepresentations and omissions alleged, were reckless in failing to obtain such 

knowledge by deliberately refraining from taking those steps necessary to discover whether those 

statements were false or misleading. 

232. As a result of the dissemination of the materially false and misleading information 

and failure to disclose material facts, as set forth above, the market price of Vivendi’s ordinary 

shares and ADSs were artificially inflated during the Relevant Period. In ignorance of the fact that 

market prices of Vivendi’s publicly-traded securities were artificially inflated, and relying directly or 

indirectly on the false and misleading statements made by Defendants, or upon the integrity of the 

market in which the securities trade, and/or on the absence of material adverse information that was 

known to or recklessly disregarded by defendants but not disclosed in public statements by 

Defendants during the Relevant Period, Plaintiffs acquired Vivendi ordinary shares and ADSs 

during the Relevant Period at artificially high prices and were damaged thereby. 

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233. At the time of said misrepresentations and omissions, Plaintiffs were ignorant of 

their falsity, and believed them to be true. Had Plaintiffs and the marketplace known the truth 

regarding the problems that Vivendi was experiencing, which were not disclosed by Defendants, 

Plaintiffs would not have purchased or otherwise acquired their Vivendi ordinary shares and ADSs, 

or, if they had purchased such securities during the Relevant Period, they would not have done so at 

the artificially inflated prices which they paid. 

234. By virtue of the foregoing, Defendants have violated Section 10(b) of the Exchange 

Act, and Rule 10b-5 promulgated thereunder. 

235. As a direct and proximate result of defendants’ wrongful conduct, Plaintiffs suffered 

damages. 

COUNT V 

Violations of Section 20(a) of the Exchange Act 

Against the Individual Defendants

236. Plaintiffs repeat and reallege each and every allegation contained above as if fully set 

forth herein. This Count is brought pursuant to Section 20(a) of the Exchange Act, 15 U.S.C. 

§ 78t(a), against the Individual Defendants. 

237. The Individual Defendants acted as controlling persons of Vivendi within the 

meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level 

positions, and their ownership and contractual rights, participation in and/or awareness of the 

Company’s operations and/or intimate knowledge of the false and misleading statements filed by 

the Company with the SEC and disseminated to the investing public, the Individual Defendants had 

the power to influence and control and did influence and control, directly or indirectly, the decisionmaking of the Company, including the content and dissemination of the various statements which 

Plaintiffs contend are false and misleading. The Individual Defendants were provided with or had 

unlimited access to copies of the Company’s reports, press releases, public filings and other 

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statements alleged by Plaintiffs to be misleading prior to and/or shortly after these statements were 

issued and had the ability to prevent the issuance of the statements or cause the statements to be 

corrected. 

238. In particular, each of the Individual Defendants had direct and supervisory 

involvement in the day-to-day operations of the Company and, therefore, is presumed to have had 

the power to control or influence the particular transactions giving rise to the securities violations as 

alleged herein, and exercised the same. 

239. As set forth above, Vivendi and the Individual Defendants each violated Section 

10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their 

positions as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of 

the Exchange Act. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiffs 

suffered damages in connection with their purchases of the Company’s securities during the 

Relevant Period. 

COUNT VI 

For Liability under Section 18 of the Exchange Act 

Against All Defendants

240. Plaintiffs repeat and reallege each of the foregoing paragraphs as if fully set forth 

herein, except to the extent any allegations above contain any facts which are unnecessary or 

irrelevant for purposes of stating a claim under this Section, including allegations that may be 

interpreted to sound in fraud or relating to any state of mind on the part of Defendants other than 

strict liability or negligence. This Count is asserted against Defendants for their violations of Section 

18 of the Exchange Act, 15 U.S.C. § 78r. 

241. As set forth above, Defendants made or caused to be made statements which were, 

at the time and in light of the circumstances under which they were made, untrue with respect to 

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material facts, in annual reports on Form 20-F, documents filed with the SEC pursuant to the SEC’s 

applicable rules and regulations. 

242. In reliance on these materially untrue statements, Plaintiffs made investment 

decisions to purchase and otherwise acquire ordinary shares and ADSs of Vivendi. 

243. Plaintiffs reasonably relied on each of these statements when deciding to purchase 

and otherwise acquire the ordinary shares and ADSs of Vivendi, not knowing that the statements 

were untrue. 

244. The Individual Defendants signed the Company’s SEC filings throughout the period 

of untrue statements discussed herein. 

245. When the truth was revealed about the false and misleading statements in the 

Company’s documents and reports filed with the SEC, Plaintiffs were significantly damaged by the 

resulting decline in the value of ordinary shares and ADSs of Vivendi. 

246. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiffs suffered 

damage in connection with their acquisitions and purchases of ordinary shares and ADSs of the 

Company. 

COUNT VII 

For Common Law Fraud and Deceit 

Against All Defendants

247. Except for the counts sounding in fraud, Plaintiffs repeat and reallege each and every 

allegation contained above as if fully set forth herein. This Count is asserted against all Defendants 

for common law fraud and deceit. 

248. Plaintiffs, without knowledge of the falsity of Defendants’ statements and omissions 

of material fact, described above, and believing such statements to be true and complete, and in 

reasonable and justifiable reliance upon the statements and representations made by the Defendants, 

as previously set forth herein, purchased or otherwise acquired ordinary shares and ADSs of Vivendi 

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in reliance upon the truth and completeness of the statements contained in the representations made 

by Defendants. 

249. Specifically, Plaintiffs relied on Defendants’ statements and omissions of material 

fact as set forth in detail above. Such reliance was based on review of annual reports, quarterly 

earnings, press releases issued to announce earnings and other matters, and reports issued by equity 

analysts at major Wall Street firms. Within such documents, Plaintiffs specifically reviewed and 

relied on the reported revenue, earnings, financial condition, and operating potential of Vivendi. 

250. Plaintiffs would not have purchased or otherwise acquired ordinary shares and ADSs 

of the Company during the Relevant Period, except for their reliance upon the representations made 

by Defendants. 

251. Certain of the false and misleading statements made by Defendants were set forth in 

SEC filings, press releases and other public statements that were heard or read directly by Plaintiffs. 

Other false and misleading statements made by these Defendants were heard or read by third parties 

who subsequently communicated such false and misleading statements to Plaintiffs. All of these 

Defendants’ statements were intended by these Defendants to be communicated to members of the 

investing public, including Plaintiffs, and Defendants intended such persons, including Plaintiffs, to 

rely thereon. 

252. At the time the false statements and representations alleged to be actionable were 

made by the Defendants, the Defendants knew them to be false and/or recklessly made said 

statements and representations without any knowledge of the truth thereof. 

253. At the time of the false statements, misrepresentations and omissions, set forth 

above, each of the Defendants intended that Plaintiffs act on the basis of their misrepresentations 

and omissions in deciding whether to purchase or otherwise acquire ordinary shares and ADSs of 

Vivendi. Plaintiffs reasonably relied thereon to their detriment in making such decisions. 

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254. Had Plaintiffs known of the material facts which Defendants wrongfully concealed 

and misrepresented, and the falsity of the Defendants’ representations, Plaintiffs would not have 

purchased or otherwise acquired ordinary shares and ADSs of Vivendi during the Relevant Period. 

255. Plaintiffs, as a direct result of their purchases and by reason of these Defendants’ 

wrongful concealment and misrepresentations, have sustained pecuniary loss for which these 

Defendants are hereby liable, both jointly and severally, in an amount to be established at trial. 

256. In addition, Defendants’ fraudulent acts represent an extensive pattern of 

wrongdoing constituting a wanton and reckless disregard for Plaintiffs’ rights and were directed at 

the public generally. Therefore, Plaintiffs are entitled to punitive damages in an amount to be 

established at trial. 

COUNT VIII 

For Negligent Misrepresentation 

Against All Defendants

257. Plaintiffs repeat and reallege each of the foregoing paragraphs as if fully set forth 

herein, except to the extent any allegations above contain any facts which are unnecessary or 

irrelevant for purposes of stating a claim under this Section, including allegations that may be 

interpreted to sound in fraud or relating to any state of mind on the part of Defendants other than 

strict liability or negligence. This Count is asserted against all Defendants for negligent 

misrepresentation. 

258. In an effort to induce Plaintiffs to purchase ordinary shares and ADSs of Vivendi, 

Defendants each negligently and without reasonable care made misrepresentations of material facts 

to investors, including Plaintiffs, and each acted negligently and without reasonable care in failing to 

disclose or concealing the true facts from Plaintiffs, as detailed herein. 

259. In addition, Defendants each negligently and without reasonable care made and 

participated in the making of public misrepresentations of material facts concerning Vivendi’s 

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operations and published financial results, and each negligently and without reasonable care failed to 

disclose or negligently concealed the true facts relating thereto. 

260. Defendants each breached their duty to provide accurate information to Plaintiffs by 

failing to exercise reasonable care in communicating information regarding Vivendi, as detailed 

herein. 

261. Defendants intended for Plaintiffs to rely on the misrepresentations alleged herein. 

262. Plaintiffs justifiably relied to their detriment upon the false information that the 

Defendants each provided in deciding to purchase ordinary shares and ADSs of Vivendi and in 

determining the price to be paid for such ordinary shares and ADSs of Vivendi. 

263. As a direct and proximate result of the Defendants’ negligent conduct, Plaintiffs 

have sustained pecuniary losses, including costs and attorneys’ fees, for which these Defendants are 

hereby liable, both jointly and severally, in an amount to be established at trial. 

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs pray for relief and judgment, as follows: 

(a) Declaring and determining that Defendants violated federal securities and state laws 

by reason of their conduct as alleged herein; 

(b) Awarding Plaintiffs compensatory damages against all Defendants, jointly and 

severally, for all damages sustained as a result of Defendants’ wrongdoing; in an amount to be 

proven at trial, including interest thereon; 

 (c) Awarding Plaintiffs punitive damages against all Defendants on the claims for 

common law fraud an deceit; 

 (d) Awarding Plaintiffs rescission; 

(e) Awarding Plaintiffs their reasonable costs and expenses incurred in this action, 

including fees for Plaintiffs’ counsel and experts; and 

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