Vivendi Universal's former chairman and chief executive, Mr Jean-Marie Messier, was arrested yesterday by French police investigating claims of illegal share dealing.
A spokesman for France's financial crimes squad said Mr Messier (47), had been taken into custody in Paris early in the morning. Under French law he can be held for up to 48 hours.
Mr Messier's detention is part of a wide-ranging inquiry led by magistrate Mr Henri Pons. At the centre of the investigation is Vivendi's purchase of 21 million of its own shares for well over €1 billion in late September or early October 2001 - just days after the terror attacks on New York and Washington which sent global share prices tumbling.
Critics say the buyback was designed to support the Vivendi share price before the publication of crucial results in the wake of the merger with Seagram - Mr Messier's most ambitious acquisition.
Mr Messier has always insisted he acted in the best interests of shareholders.
Investigators are scrutinising whether the purchase broke rules on share buybacks.
The inquiry is also looking at allegations by Appac, an association which represents small shareholders in France, that Vivendi - which owns French pay-television group Canal Plus, music group Universal Music and a controlling interest in France's second largest telecommunications group SFR Cegetel - published misleading information to the markets in 2001 and 2002.
Vivendi's former finance director, Mr Guillaume Hannezo, and two other company officials have already been placed under formal investigation - one step short of being charged - by the Pons inquiry.
Commenting on Mr Messier's detention, his lawyer Mr Olivier Metzner said: "This interview is a normal part of an investigation and follows a request made by Mr Messier himself last March that he should be placed under formal investigation in order to be able to explain himself better and better defend his former colleagues.
"He took with him a number of documents he believes would be able to contribute to providing precise and detailed answers to the questions raised by the investigation."
Appac's president, Mr Didier Cornardeau, said: "Messier's detention shows our suspicions and accusations were absolutely justified."
Yesterday's arrest marks a further chapter in Mr Messier's fall from grace. At the height of his campaign to turn Vivendi from a staid French utilities group into a global media and entertainment empire, Mr Messier was seen as the spearhead of French efforts to challenge American economic and corporate might.
Never one to play down his own role in affairs in 2000, Mr Messier published his autobiography, titled J6M: Jean-Marie Messier, Moi-meme, Maitre du Monde.
But the massive debt built up by the acquisitions and the share buyback programme sparked a financial crisis and Mr Messier was forced out in July 2002.
French stock market regulators have already looked into the allegations regarding the September and October 2001 share repurchase being scrutinised by Mr Pons. Their report has yet to be published.
