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Policy
Troubled Rhodia Takes More Hits
French firm faces criminal probe, accusations of fiscal improprieties
by Rick Mullin
April 4, 2005
| A version of this story appeared in
Volume 83, Issue 14
BUSINESS IN EUROPE
France's stock market regulatory authority, AMF (Autorit des Marchs Financiers), has accused Rhodia of improper financial disclosures dating back to 2000. Separately, a criminal probe has been launched into possible accounting irregularities and insider trading dating back to 1999.
Both developments follow forecasts by Rhodia that it will be profitable in 2006 for the first time in five years.
The allegations against France's largest specialty chemical firm cover a period of turmoil during which Rhodia amassed debt from high-priced acquisitions. The CEO at the time, Jean-Pierre Tirouflet, was ousted in October 2003. His successor, Jean-Pierre Clamadieu, has cut 1,600 jobs and sold off several businesses.
AMF alleges improprieties in Rhodia's valuation of ChiRex, which it acquired in 2000; its valuation of deferred tax assets; and its disclosures on debt, liquidity, and coverage for environmental risks.
The criminal investigation, conducted by the Paris public prosecutor's office, stems from lawsuits filed by investors, including Edouard Stern, a banker and former Rhodia board member who was found murdered on Feb. 28. A French woman has been arrested in connection with the murder. Stern had led a push to unseat Tirouflet in 2003.
During the period in question, Thierry Breton, France's current finance minister, was a Rhodia board director and chairman of the firm's audit committee. He left the board in 2002 and has denied knowledge of any company wrongdoing.
Rhodia says it will present arguments to AMF during proceedings that will last "several months." The company faces fines of up to $1.9 million from AMF. It had no comment on the criminal investigation.
One stock analyst suggests to C&EN that Clamadieu might be able to use the allegations, which focus on a period prior to October 2003, to highlight Rhodia's recent successes.
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