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When the French conglomerate Vivendi Universal sold shares in the United States, it hoped to tap into a rich vein of American capital. But it also tapped into something else: securities class actions. European and Pacific Rim businesses are finding themselves facing off in court against firms like Milberg Weiss Bershad Hynes & Lerach, answering complaints about too-optimistic financial projections or less-than-honest accounting practices. Now that the economy has gone global, so has the plaintiffs bar. “It’s very hard for these foreign companies to come here and behave themselves,” said Darren Robbins, one of the Milberg Weiss partners suing Vivendi. The suits represent a clash of business cultures. Few nations have financial regulations as stringent as those of the United States, and none has a plaintiffs bar as active. While American companies have grown used to investor class actions, viewing them as a cost of doing business, European executives see them differently. “They look at it as a personal affront,” said Robert Varian, a Clifford Chance partner in San Francisco. Varian represented a London-based company sued by Milberg in the late ’80s. The trend has since caught fire. According to a study by PricewaterhouseCoopers, at least 50 securities suits have been filed against foreign registrants in the past three years. Foreign executives have taken notice, and they don’t like it one bit. Their anger was evident during a November series of seminars held in Milan, Paris and London and attended by some of the leading lawyers in the securities fraud field. “One representative said his company was thinking about delisting because it didn’t want to deal with them,” Varian said. To Robbins, it’s a cultural exchange. Business, he said, is viewed differently overseas. It’s seen as war — anything goes. And executives are slow to play fair. “It’s hard to completely alter your conduct just because you raise $100 million in the American capital markets,” Robbins said. Which is why some see these suits as the wave of the future. Foreign companies that register stock here for sale as American Depositary Receipts are — by definition — large, multinational corporations. In the ’90s, the roaring American economy became an attractive source of capital for them. But selling those ADRs subjected them to American rules. The companies had to file financial statements with the Securities and Exchange Commission. And, as they came to find out, they were also subject to private class actions by their own investors. In other countries, “they don’t have securities class actions,” Varian said. “They really don’t. It’s really a U.S. phenomenon.” American court rules are another surprise for foreign executives. Defense attorneys say clients are flabbergasted by the amount of discovery they’re forced to turn over to courtroom adversaries. Vivendi’s problems are among the most spectacular. The company’s woes are worldwide news as it strains under debt its ousted CEO once said was not a problem. The suit against the company raises novel legal questions, including whether a class can include foreign as well as U.S. investors to produce a worldwide class proceeding by American rules. “That’s the big issue that a number of courts have grappled with, and it’s still out there,” said Steven Toll, of New York’s Cohen, Milstein, Hausfeld & Toll, who has a case pending in the Eastern District of Virginia. American enforcement authorities are also pushing the envelope with Vivendi. The U.S. attorney’s office in New York has opened an investigation, using information about the company seized in Paris and passed along through an agreement between France, and the U.S. authorities are generally seen as tougher on white-collar crime than their European counterparts. On Tuesday, the SEC announced it had reached a settlement with Vivendi and its departed CEO, Jean-Marie Messier, who now lives in Manhattan. The settlement requires Vivendi to pay a $50 million penalty and for Messier to forfeit $25 million in severance pay. The idea that U.S. regulators can intervene in the compensation a foreign company pays its own executives “just raises some odd questions,” said Varian, who isn’t involved in the case. Vivendi isn’t alone. Investor class actions are pending against the British firm Cable & Wireless, the Dutch company Royal Ahold and many others. Suing — and representing — these globe-straddling giants takes some savvy. With all the hurdles of geography, language and culture, Robbins and Varian said investigating the cases can be difficult. While Milberg Weiss doesn’t have overseas offices, Clifford Chance is an international firm, which Varian said is an asset — especially when trying to understand what happened in a particular business climate. “It helps a lot,” Varian said. As American lawyers familiarize themselves with the operations of foreign businesses, there are signs the companies are catching on to how American companies cope. For example, Varian said, when foreign companies get set to trade securities here, “they’re pretty well insured.”

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