Magistrate Appointed in Hermès Case

Luxury brand "encouraged" by probe into LVMH's investment in its share capital.

PARIS — The war of words between Hermès International and LVMH Moët Hennessy Louis Vuitton reignited last week as the Paris prosecutor’s office said it would hand over a criminal complaint of insider trading to an investigating magistrate.

This story first appeared in the March 18, 2013 issue of WWD.  Subscribe Today.

“We are very much encouraged by this,” Patrick Albaladejo, deputy chief executive officer at Hermès, told WWD. “We welcome an in-depth investigation to be conducted, and hopefully in a diligent way. We believe we have a strong case.”

In a statement, LVMH reiterated that the Hermès complaint, lodged last July, is “completely without foundation.”

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Sources close to LVMH said the appointment of an investigating magistrate is par for the course in such cases, and the process is likely to take many months.

According to Albaladejo, “The judge decides when his investigation is complete; she has no timeline to respect.”

It is understood Hermès is accusing the world’s largest luxury conglomerate of insider trading, collusion and manipulating stock prices to amass a chunk of its share capital via cash-settled equity swaps.

LVMH in turn said it filed a suit against Hermès for “slander, blackmail and unfair competition.”

The Paris prosecutor’s office opened its preliminary inquiry into the Hermès complaint last October.

LVMH said last week its complaint would also be handed over to the investigating magistrate in hopes that it would put an end to “disloyal” and slanderous campaigns carried out by Hermès over the past two years.

LVMH surprised markets by revealing in October 2010 that it had amassed a 17.1 percent stake in Hermès via cash-settled equity swaps that allowed it to circumvent the usual market rules requiring firms to declare share purchases. It has since raised its stake to 22.6 percent, as of Dec. 31.

French stock-market regulator AMF in November 2010 launched an investigation to determine if LVMH respected market rules, which it plans to refer to its sanctions commission later this year.