Vivendi shares plummet

Jean-Marie Messier resigned on Monday

Shares in French media giant Vivendi Universal dropped by as much as 40% on Tuesday after allegations about its accounting practices.

Investors in Paris and New York took fright after French newspaper Le Monde reported that the company had tried to inflate its profits.

Under the headline "Vivendi's opaque accounts" the newspaper claimed that the company had tried to add 1.5bn euros to its 2001 accounts as part of a complex transaction involving shares in BSkyB.

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The report said that Vivendi's efforts to distort its accounts failed after French regulators halted the move.

The company has denied any wrongdoing.

In a statement, it said the US Securities and Exchange Commission had approved Vivendi's treatment of the disposal of its stake in BSkyB in the company's 2001 accounts.

And Vivendi said that in France, it had strictly applied the treatment recommended by the French stock market regulator the COB.

Andersen advised

Le Monde's accusation came shortly after Vivendi's controversial chief executive, Jean-Marie Messier, bowed to pressure from shareholders and directors and handed in his resignation.

A wave of accounting irregularities has been sweeping through corporate America, with energy giant Enron, telecoms firm WorldCom and copier-maker Xerox all caught up in scandal.

These companies have been forced to restate their profits.

Both Enron and WorldCom employed the accounting firm Andersen to audit their books.

Andersen was also an adviser to Vivendi.

Investor panic

Earlier in the day, Vivendi suffered a credit downgrade, which might also account for the sharp fall in the share price.

At one point the company's shares on the Paris stock market fell 40% but they recovered some ground to close 25.5% lower at 17.80 euros.

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Shaggy

The company is also quoted on the New York stock exchange where shares closed down 21% at $17.76.

The French firm reported losses of 13.6bn euros for 2001.

A period of fast and furious expansion during the hi-tech boom had saddled the firm with heavy debts and a string of assets for which it had overpaid.

The charismatic chief executive, Jean-Marie Messier, was blamed for the financial difficulties.

He eventually agreed to resign after a board meeting on Monday night

His decision to stand down is thought to be unrelated to the allegations of manipulating accounts.

A new interim chief executive is expected to be announced on Wednesday.