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French Media Company Vivendi could face up to $1.7 billion in fines against stated 100% GVT acquisition, Brazil’s Securities Regulator Says

French giant media company Vivendi could face up to more than one billion dollars in fines from Brazil’s securities regulator over a fraud case involving its acquisition of GVT, the Brazilian phone company. Reports surfaced Sunday in a domestic Brazilian newspaper, stating that the French media firm could pay about 3 billion reals, an equivalent of about 1.7 billion dollars for suspected fraud when it bought the Brazilian phone company.

Brazilian securities regulator, CVM, revealed through its investigations that Vivendi had bought less than the mandatory 40% stake in the Brazilian company when it reported conclusion the deal in November 2009, the reports said. As such, the French firm might have reported full ownership of the Brazilian firm even when it had less than half of its stake, a move now found out to have been illegal, necessitating the securities agency to take action.

The Brazilian paper that first reported the story, Folha de S. Paolo did not state the source of its report but went on to add that even so, the French firm has the option of agreeing on a solution over the matter with the Brazilian securities agency, CVM. If the fine is handed down, it will become one of the biggest fines to be handed by the countries securities regulator, the newspaper reported further without revealing the exact timing of the announcement of the fine.

According to Folha’s reports, the securities regulator, CVM brought the charges before Vivendi after realizing that the French firm had misled Telefonica amongst other investors through its announcement that it had successfully launched and concluded a 100% takeover of GVT knowing clearly that it was yet to.

In that deal last November, the French media firm paid a whopping 7.7 billion reals for GVT, one of Brazil’s fastest growing telecommunications companies involved in fixed-line and data services provision. However, Vivendi decried the fines saying it had followed due diligence and adhered to Brazil’s regulations in the acquisition of GVT and as such, the company had not received any fine notifications from CVM.

Vivendi further said that it had adhered to all of the legal and regulatory requirements during the acquisition and talk of fine was a “conjecture.” Even so, Vivendi is expected to give all of the documents appertaining to the transaction before mid September, as Brazilian federal prosecutors await CVM’s decision that will decide if a probe is launched into the transaction or not.

26 July 2010.