LVMH SHOOTS BACK AT GUCCI WITH ITS OWN DEFAMATION SUIT

Byline: Samantha Conti

NEW YORK — A furious LVMH is firing back at Gucci.
Twenty-four hours after Gucci revealed it plans to file a lawsuit against Moet Hennessy Louis Vuitton for criminal defamation, LVMH struck back with a countersuit against Gucci chairman and chief executive Domenico De Sole and Serge Weinberg, chief executive of Pinault-Printemps-Redoute, on similar grounds. LVMH issued a statement Thursday accusing both of making “inaccurate and defamatory” statements about the French luxury goods group in this newspaper and in the French daily Le Figaro.
Earlier this week, LVMH accused Gucci of secretly issuing a generous pack of stock options to De Sole and Gucci creative director Tom Ford as part of Gucci’s strategic alliance agreement with PPR. As reported, De Sole, who is using those charges as the basis for Gucci’s lawsuit against LVMH, branded the French group’s claims as “truly, totally and completely false,” and, in the context of Gucci’s criminal defamation lawsuit, accused LVMH of “fraudulent, anticompetitive behavior.”
Referring to the stock options, James Leiber, director of corporate affairs for LVMH, said: “LVMH was simply disclosing information that Gucci did not want to be disclosed. And then they turn around and accuse us of being fraudulent and anticompetitive? We consider Gucci’s statements criminal defamation.” He added that LVMH specifically took issue with statements that Weinberg made to Le Figaro and De Sole’s comments in WWD. Weinberg, LVMH claims, “attempts to deny the disturbing coincidence between these [option] grants and the agreement Gucci entered into with PPR, through his inaccurate and defamatory statements.”
LVMH’s lawsuit will be filed in Paris, although the company did not say when.
Although LVMH failed in its bid to take over Gucci last year, it remains a minority shareholder with a 20.6 percent stake in the company.
A Gucci spokesman said: “We will vigorously defend this action and move forward with our own proceedings.” He added: “Gucci has conclusively demonstrated that the defamatory allegations that LVMH made this week were false.”
On Wednesday, Gucci disclosed in a statement that De Sole and Ford received a total of five million stock options after the PPR deal was signed, and that shareholders approved the granting of those options at the company’s general meeting in June. “There has never been any agreement [oral or written] between PPR and Gucci or its key executives that linked the future compensation of our key executives to the March 19, 1999 Gucci/PPR Strategic Investment Agreement,” the Gucci statement said.
LVMH, instead, contends that Gucci tried to hide key details of the stock options from its shareholders. “Gucci has a pattern of behavior of not telling shareholders about important things, particularly concerning the personal interests of Mr. De Sole and Mr. Ford,” said Leiber.
Thursday’s action by LVMH is the latest in a series of lawsuits that the French group has filed against Gucci. Ever since March 1999, when Gucci welcomed PPR into the group as its white knight, LVMH has accused Gucci of mismanagement and cheating its minority shareholders. Gucci denies those claims and the two have been waging war in court since then.
As reported, LVMH filed a lawsuit Monday with the Enterprise Chamber of the Amsterdam Court of Appeals that seeks to cancel the Gucci-PPR alliance, an alliance that successfully fended off LVMH’s acquisition attempt. LVMH requests that the court investigate mismanagement at Gucci and the circumstances under which it entered into the alliance. LVMH filed its complaint on the heels of the Dutch Supreme Court’s decision to throw out an earlier ruling that upheld the Gucci-PPR relationship. The alleged secret grant of options was unveiled on Monday as further evidence of mismanagement.
Gucci immediately rejected the allegations of mismanagement and said it would challenge LVMH’s action in the Enterprise Chamber. The Enterprise Chamber has scheduled a hearing on the matter for Jan. 25 at 10 a.m. At the hearing, the chamber is expected to announce whether or not to grant LVMH’s request and investigate the Gucci-PPR alliance.
In March, 1999 Gucci issued a 40 percent stake to PPR, headed by Francois Pinault, a key rival of LVMH’s Bernard Arnault — in exchange for $3 billion in cash — as part of a strategic agreement aimed at building a world-class luxury goods group.
Since then, the partners have added Yves Saint Laurent, Sergio Rossi and the luxury jeweler Boucheron to their stable. PPR, with a 42 percent stake in Gucci, is the company’s largest and most influential shareholder.
As for De Sole’s and Ford’s stock options, the company said they were agreed upon months after the Gucci-PPR deal. Under the terms of his latest contract, Ford has the option to buy one million shares at $75; $90; $110 and $135 over the four-year period. De Sole’s contract is similar, but not as lucrative. The Gucci chief’s new contract lasts until 2003 and includes a total of one million options at similar strike prices. Gucci has an option to extend De Sole’s contract for an additional year, and if that happens, De Sole would receive an extra 250,000 options.
LVMH has said it will produce evidence that Gucci agreed to grant the options to Ford and De Sole in June 1999 when the alliance between PPR and Gucci went into effect. LVMH said earlier this week that it planned to file a complaint with the Securities and Exchange Commission shortly.

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