# F4 — Executive Programs / Leadership Cycles
*3 ACF® pedagogical cases for executive programs and leadership cycles in all formats (executive, advanced management, executive masters, presidents' cycles, high-level continuing education).*

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## F4-C1 — Personal liability of the executive: 14 months after the incident, formal indictment

### Identity

| | |
|---|---|
| **Level** | EMBA / Executive Master / Senior Leadership Cycle |
| **Recommended duration** | 4h30 (1h brief + 1h30 deliberation + 1h30 audit / debrief + 30 min wrap-up) |
| **Format** | Teams of 4-5 — each participant takes on a role (CEO / CFO / DPO / Chairman of the Board / independent director). Role play of legal argument before a simulated examining magistrate |
| **Final deliverable** | 8-page defense memorandum + analysis of personal liabilities + recommendation to the Board + 90-day remediation plan |

### Brief

**HÉRITAGE & PARTNERS — family private bank.** 240 years of existence, 5th-largest independent French wealth manager. €32B AUM (2025), 580 employees, Paris headquarters, branches in Luxembourg + Geneva + Monaco. Shareholding: 71% founding family (5th generation), 18% management, 11% Wendel. Solid profitability (RoE 14.2%), reputation = primary asset.

**The initial context (April 2025).** CEO Édouard Bréville (54 years old, in office for 6 years) deployed **Argus**, a private client operations monitoring agent. Argus monitors 2.4 million operations/year in real time (movements, allocations, anomalies, money-laundering signals, client vulnerability). Operating autonomously on:
- AML pattern detection (automatic TRACFIN alert)
- Temporary freeze of suspicious operations (< €50K)
- Automatic contact with the advisor for validation above the threshold
- Generation of the suspicious activity report (SAR) to TRACFIN

Argus was validated by the Risk Committee (favorable opinion from Mazars + Bredin Prat on compliance), presented to the Board (favorable vote 7/9 — Mrs. Chartier abstaining "on principle"), validated by the ACPR within the framework of continuous licensing.

**The incident (November 16, 2025).** A Russian UHNWI client (Mrs. A., 78 years old, inherited fortune, Monaco tax residence for 23 years) requests a transfer of €4.2M to a Cypriot bank. Argus:
1. Detects 3 risk signals (amount, destination, profile)
2. Triggers automatic freeze
3. Generates and sends a SAR to TRACFIN (autonomously)
4. Notifies the advisor (Patrick V.)

Mrs. A. was in fact **in the process of paying a ransom** following the kidnapping of her grandson in Switzerland. The family had been given 14 hours to execute the payment. The Argus freeze + TRACFIN investigation delayed the operation by 9 days. The grandson was found deceased.

**14 months later (January 2027).** The A. family has filed a complaint (involuntary manslaughter by negligence + violation of banking secrecy in the SAR). The financial prosecutor's office has opened a judicial investigation. **Édouard Bréville and Patrick V. are indicted for involuntary manslaughter**. The A. family is claiming €80M in damages. The press has made the affair a textbook case on "blind algorithmic governance."

**The case elements.**
- Argus had been deployed without prior simulation of a "ransom" scenario (the scenario did not appear in the 47 use cases tested)
- The ACF-08 Registry (existing) shows that 14 comparable cases (freeze + SAR without human intervention) had occurred over 11 months — none had posed a problem, so the team had not examined them individually
- The Argus Constitution (ACF-03) did not mention the possibility of a situation involving immediate physical danger to a person
- Patrick V. had received the notification but was in the middle of an evening event at 10 PM, had not seen the message before the next morning (10 AM)
- The Risk Committee had met 3 times on Argus in 11 months but had never examined the procedure for "human triggering in serious incident mode"
- The Bredin Prat 2025 opinion did not cover the risk of "negligence causing bodily harm"

**The actors involved.**
- **Édouard Bréville**: CEO, indicted. Actions: he validated Argus, signed the deployment, chaired the Risk Committees, never requested an "extreme case" test
- **Patrick V.**: advisor, indicted. Actions: he received the notification, did not respond, did not activate the on-call duty
- **The Board of Directors**: considering replacing Édouard or defending him
- **The ACPR**: announced a thematic review mission on the algorithmic governance of banks
- **The AMF**: risk of insufficient financial disclosure (Argus does not appear explicitly in the management report)
- **Wendel (11% shareholder)**: considering supporting the A. family's *ut singuli* action
- **The 580 employees**: morale in decline, 8 departures in the affected BU in 2 months
- **The DDAO — *who did not exist in November 2025***: Héritage & Partners had **no Delegated Decision Agent Officer (DDAO)** at the time of the incident. Supervision of Argus rested on the Head of Compliance and Internal Control with overlapping functions: general banking compliance + AML + agentic supervision. No actor had the *exclusive* mission of challenging Argus's automated decisions, nor the formal power to block a deployment or impose extreme scenario testing. **The absence of a DDAO has become a central argument in the prosecution's conclusions**: "*Héritage & Partners had not put in place the dedicated supervisory function that Argus's criticality required — systemic organizational failure*". The Board of Directors has just urgently appointed (January 2027) **Ms. Catherine Vasseur** (61 years old, former Deputy Director of the ACPR) as the **group's first DDAO**, reporting to the Audit Committee with direct access to the Chairman.

### Mission

You are the leadership team of Héritage & Partners in January 2027. You must in parallel:

1. **Prepare Édouard Bréville's defense**: legal arguments, posture, chain of liability
2. **Decide Édouard's fate**: continued tenure, resignation, negotiated departure — with analysis of consequences
3. **Build a 90-day remediation plan**: for the firm, for the Argus agent, for governance, for communications
4. **Prepare the defense before the ACPR Board** (imminent review mission)

### Documents provided

- Indictment decision (excerpt, 6 pages)
- Argus Constitution (ACF-03) as it existed in November 2025
- 47 use cases tested (tabular summary)
- ACF-08 Registry — 14 comparable cases (excerpt)
- Risk Committee minutes x 3 (excerpts, topics discussed)
- Bredin Prat 2025 opinion (summary + limitations)
- April 2025 Board minutes (Argus vote)
- Press articles from the last 14 months (3 major articles)
- Text of the complaint (excerpts)
- Legal framework: Art. 121-3 Penal Code (characterized fault), Art. 223-6 (failure to assist a person in danger), Art. L. 511-37 CMF (banking secrecy), Sapin 2 + duty of vigilance
- Precedents: *Furiani case* (executive liability), *Total / Erika case*, *Lafarge Syria case* (Court of Cassation 2024)

### ACF tools to mobilize

ACF-08 (Registry audit — what was tracked, what was not) → ACF-10 (retrospective governance audit of the 11 months) → ACF-11 (revision of risk matrix, integrating bodily harm risk) → ACF-03 (overhaul of Argus Constitution) → ACF-01 + ACF-02 (re-mapping of decisions, integration of "life in danger" scenarios) → ACF-06 (overhaul of Kill switch — 24/7 accessibility via on-call rotation, direct client triggering possible) → ACF-09 (90-day improvement plan) → ACF-13

### Expected deliverables

1. **8-page defense memorandum** structured: facts, contested legal qualification, exculpatory evidence, requests
2. **Personal liability analysis**: who could reasonably foresee, who should have diligenced what, how to share between individuals, organizations, vendor
3. **Decision on Édouard Bréville**: recommendation to the Board with cost/benefit analysis (retention = signal of cohesion but risk of paralysis; resignation = signal of accountability but implicit accusation; negotiated departure = compromise; each option has collateral damages)
4. **90-day remediation plan**: redesigned Argus, training, review of all past comparable cases, internal communications, external communications
5. **Anticipation note to the ACPR**: posture, transparency, commitments
6. **Recommendation to the AMF**: financial disclosure to correct / complete
7. **Board note on D&O liability**: is the coverage sufficient, must it be urgently renegotiated
8. **Framework for DDAO Catherine Vasseur**: scope, reporting to the Audit Committee, right of reasoned opposition on any agentic deployment, dedicated budget and team, escalation mechanism to the Board — framing that must be presentable to the ACPR as a **structural organizational response to the incident**

### Evaluation grid

- **Understanding of context (15)**: simultaneously holding (1) personal criminal liability, (2) civil + financial liability, (3) fiduciary liability of directors, (4) ACPR/AMF regulatory liability, (5) moral liability + organizational impact. A participant who reduces this to a narrow legal debate caps at 9/15
- **Decision mapping (15)**: retrospective overhaul of the ACF-01/02 mapping — what should have existed in April 2025. Identification of the human *single point of failure* (Patrick V. alone + without rotating on-call)
- **Relevance of recommendations (20)**: the defense must be **technically solid** (Édouard had commissioned a Mazars audit, Bredin Prat opinion, Board validation, ACPR validation — he did *what a prudent executive would do*) BUT also **humble** (the ransom scenario had not been considered, this is an acknowledged systemic flaw). A memorandum that pleads *only* personal non-responsibility without concession caps at 12/20 (losing). A memorandum that pleads collective responsibility + credible remediation can convince
- **Safeguards (15)**: demand for the future (1) a **24/7 human escalation mechanism accessible to the end client** on any automated freeze, (2) mandatory rotating on-call duty for any agentic deployment in autonomy, (3) an annual *red team* on extreme scenarios (ransom, suicide, kidnapping, medical force majeure), (4) an *emergency unlock* mechanism with 2-of-3 human validation (CEO + Head of Compliance + Deputy CEO)
- **Anticipation of drifts (15)**: cite at minimum:
  - **Survivor bias in the Registry** (the 14 previous similar cases without incident biased the analysis toward the status quo)
  - **Complacency by performance** (Argus performed on AML KPIs, so the organization did not question its scope)
  - **Diffusion of responsibility** (CEO → Board → Risk Committee → ACPR → vendor — each validated assuming the others had reviewed)
  - **Jurisprudence risk** (the ruling on Édouard will set a precedent — his defense must think about what will happen across the entire financial industry)
- **Boldness bonus (10)**: recommending that **Édouard Bréville voluntarily make himself available to justice** + resign for credible remediation reasons + remain in the legal defense (posture of "accepted responsibility") earns a bonus if the logic is sound. Recommending that **the Board pursue the liability of the Argus vendor** for failure to warn about residual risks also earns a bonus

### Analytical paths (instructor)

**The trap**: the primary defensive reflex ("it's not our fault, it's the agent / the vendor / the unforeseen scenario"). Good EMBA participants know that **in executive criminal law, what matters is provable diligence**. Édouard diligenced a great deal. But he did not diligence *enough* on bodily harm risk — which was foreseeable (kidnapping = known risk for UHNWI clientele).

**Frequent error**: thinking that the legal defense plays out in the courtroom. It plays out in the **ACF-08 Registry** and the **ACF-03 Constitution** as they existed in November 2025. If the Registry shows 14 comparable cases not individually examined, the judge will conclude there was a systemic failure. If the Constitution does not mention bodily harm risk, the organization is in breach of precaution.

**Subtle error**: confusing **moral responsibility** and **legal responsibility**. The A. family wants moral recognition (and €80M). The legal defense wants to limit criminal liability. The two can coexist: Édouard can publicly acknowledge his moral responsibility (and uphold the institution's dignity) while building a technical defense on the qualification of involuntary manslaughter (a *characterized fault* exposing others to a risk the perpetrator could not ignore is required — cf. Art. 121-3 PC).

**Legal references 2025-2027**:
- **Penal Code Art. 121-3** — executive criminal fault (characterized fault)
- **Penal Code Art. 223-6** — failure to assist a person in danger
- **Monetary and Financial Code Art. L. 511-37, L. 561-1 et seq.** — banking secrecy and anti-money laundering
- **Sapin 2 Law** — duty of vigilance on corruption (extensible by case law)
- **Vigilance Law 2017** — extended to social and environmental risks + emerging case law
- **Lafarge Syria case** (Court of Cassation Jan. 16, 2024) — precedent of complicity by omission/non-prevention
- **Furiani case** (Bastia 1992 → Court of Cassation) — reference on executive liability in collective harm
- **AI Act Art. 26.5** — obligations of the user of a high-risk AI system (and the AML / monitoring agent could shift to high risk)
- **D&O insurance** — classic contractual limitations (personal fault not covered, gross negligence excluded)

**To go further**: introduce the concept of **systemic risk vs personal risk**. When the organization deploys an autonomous system by validating 7 levels of governance, and an unidentified systemic flaw causes harm, *who* should be criminally liable? French criminal doctrine remains centered on personal liability (the CEO as "legal representative"), but case law is evolving (cf. Lafarge) toward more diffuse liability. For the future: the executive must anticipate that **agentic autonomy without extreme red teaming could become a characterized fault by failure of precaution**.

**Reading of the case by the DDAO**: Catherine Vasseur arrives *too late* — the incident has occurred, the indictments are pronounced. But her appointment is itself a deliverable of the defense: it demonstrates that the organization has *understood* the systemic flaw and corrected it. Her first mission is paradoxical: (1) reconstitute what a DDAO should have done upstream of Argus (red team extreme scenarios, mandate refusing autonomy on UHNWI VIP operations without a second human factor, direct-client emergency unlock mechanism), and (2) deploy this mechanism on **all** existing agents of the group — not just Argus. For Édouard's defense, the retroactive existence of a DDAO does not reduce his personal liability, but it reduces the **personal liability of future executives** — creating a useful organizational precedent. A participant who proposes to **publicly publish** the Catherine Vasseur mandate (transforming the sanction into a standard-setting signal) achieves the boldness bonus.

### Variants & extensions

- **V1 — extreme media pressure**: a mainstream journalist confronts Édouard as he exits the courthouse. What immediate posture? What communications framing?
- **V2 — Wendel acts**: Wendel announces support for the A. family's action. The Board finds itself divided. How does the leadership team hold?
- **V3 — the ACPR hardens**: the ACPR mission concludes a systemic governance failure and proposes a public sanction + obligation to notify clients. Response?

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## F4-C2 — Annual strategic cycle of a listed group with integrated agents: who leads when AI prepares everything

### Identity

| | |
|---|---|
| **Level** | EMBA Year 2 / Presidents and Executives Cycle |
| **Recommended duration** | 5h (1h brief + 2h mapping + 2h debrief + simulated Strategy Committee wrap-up) |
| **Format** | Teams of 5-6, Board Strategy Committee + Executive Committee role play |
| **Final deliverable** | 8-page integrated annual framework + decision allocation matrix + AI-strategic cycle audit protocol + CSRD communication plan |

### Brief

**EUREKA INDUSTRIES.** CAC 40 listed industrial group, €11.8B revenue (2025), 38,000 employees, 6 sector BUs (Mobility / Energy / Materials / Healthcare / Aerospace / Defense). Stable share price, regular dividend, 71% free float, activist funds present (3% of capital combined).

**The context.** CEO Charles-Henri Vasseur (62 years old, in office for 5 years) has evolved the **annual strategic cycle** since 2024 through progressive integration of agents:

- **MARS** (Market Analysis & Reporting System): agent that produces monthly market and competitive intelligence notes for the BUs
- **POSEIDON**: agent that prepares the budgets of the 6 BUs from Executive Committee targets and 7-year history
- **ATHENA**: agent that prepares the notes for the Board Strategy Committee (4 times per year)
- **HERMES**: agent that prepares Investor Days, financial communications, CFO scripts
- **APOLLO**: agent that produces governance, ESG, CSRD notes for the Board

At the 2026 AGM, the integrated CSRD report must for the first time include an **AI-governance section** (CSRD + ESRS transposition + EFRAG 2025 recommendation).

The legal counsel proposes 3 levels of transparency in the CSRD report:
- **Level 1 — minimalist**: "the group uses AI tools for internal document production"
- **Level 2 — industry standard**: description by function + key actors
- **Level 3 — full disclosure**: description of architecture + decision scope + governance framework + metrics

**The tensions.**

- **Chairman of the Board Henri-Marie Claverie** (75 years old, former CEO of another CAC 40 company) raises a question: "If Athena prepares the notes, who really prepares the Committee's decisions? Who is fiduciarily responsible?"
- **Independent director Sarah Cohen** (54 years old, former CEO of Renault Korea): "We vote on notes structured by an agent that has no fiduciary obligation. Is our duty of attention fulfilled?"
- **CFO Jean Rivière** (49 years old): "Without Poseidon, I can no longer keep the budget schedule. 38,000 people, 6 BUs, 14 markets — it's mathematically impossible in 8 weeks."
- *[Fictional scenario]* **An American activist fund** (1.8% of capital, called "*Crescent Activists*" for the case): "Eureka practices *governance opacification* through cognitive delegation to agents. We demand (1) full disclosure, (2) annual independent audit, (3) scope limitation."
- **The AMF**: *[Fictional scenario for case purposes]* the AMF signals in its next financial information review that "*the widespread use of AI agents in the production of financial information raises new challenges of attribution and reliability*". In reality, the AMF has published several general positions on AI in market control and governance — to be complemented by current documentation
- **The statutory auditors (PwC + Mazars)** request a **detailed report on the controls** applied to the outputs of agents that contribute to financial information (HERMES in particular)
- **The risk for the CEO**: if an agent contributes to the production of financial information and a material error is produced, who signs the report? Who is liable under Art. L. 451-1-2 CMF?
- **DDAO Béatrice Hemmer** (Delegated Decision Agent Officer of the group, 49 years old, former Director of Financial Information at another CAC 40 then 3 years at the AMF — recruited in November 2025 specifically to structure governance of the 5 agents) — **reporting to the Audit Committee and the Board Strategy Committee**, *not* to the Chairman. Position: "Of the 5 agents, MARS and POSEIDON can remain as is. ATHENA, HERMES and APOLLO touch financial information or governance — I oppose any scope extension without: (1) prompt + model version traceability, timestamped and signed, (2) documented human review by a named Executive Committee member (who reviewed, when, what changes requested), (3) annual independent audit by a firm outside the statutory auditors, (4) explicit attribution clause in the reports."

### Mission

You are the Executive Committee in a preparatory meeting for the 2026 AGM. You must, within 6 weeks:

1. **Precisely map each agent's role in the strategic cycle** and identify where human responsibility must be reinforced
2. **Define the level of CSRD transparency to adopt** (level 1, 2 or 3, or a variant) with reasoning
3. **Build an AI-strategic cycle audit protocol** presentable to the statutory auditors, AMF, activists
4. **Decide the question of attribution**: who signs what, who is responsible for what

### Documents provided

- Architecture of the 5 agents (MARS, POSEIDON, ATHENA, HERMES, APOLLO) — capabilities, data mobilized, scope
- Last 4 Strategy Committee notes prepared by ATHENA (excerpts)
- 1 financial press release drafted by HERMES (followed up by the CFO)
- Open letter from activist fund *Crescent Activists* (*fictional document*)
- *[Fictional document]* AMF annual review note (to be substituted with the latest AMF review in force on financial information)
- **CSRD framework** (EU Directive 2022/2464) + **ESRS** (12 standards) + **EFRAG** guidelines
- *Fictional* legal opinions on the 3 levels of transparency
- Academic doctrine: US/EU literature on AI corporate governance (cf. work of *Edward Rock*, NYU School of Law, on governance; *John Coates*, Harvard Law School, on governance and financial information) — *references to be complemented by current publications*
- Precedents: Tesla autopilot disclosure to the SEC (high-profile topic), resignation of Steve Easterbrook (CEO of McDonald's) in 2019 (board oversight, *Caremark duty*)

### ACF tools to mobilize

ACF-00 (Eureka Decision Sovereignty Score) → ACF-01 + ACF-02 (mapping of strategic cycle decisions) → ACF-03 (Constitution common to the 5 agents — cross-agent rules) → ACF-04 + ACF-12 (mandate differentiated by agent) → ACF-05 (continuous supervision) → ACF-08 (Registry — CSRD requirement) → ACF-10 (annual governance audit) → ACF-11 (fiduciary + financial risk matrix) → ACF-13

### Expected deliverables

1. **8-page integrated annual framework**: presented to the Board, setting out the Eureka doctrine on AI-governance
2. **Decision allocation matrix**: step × primary responsibility × contributing agent × final human validator × signatory
3. **AI-strategic cycle audit protocol**: who audits (statutory auditors + internal audit + independent committee?), at what frequency, on what criteria, with what investigative power
4. **Adopted CSRD communication**: draft "AI-Governance" section of the integrated report (3 pages ready to publish)
5. **Response to the *Crescent Activists* fund**: 2 pages, public posture
6. **Legal attribution framework**: who signs what (Art. L. 451-1-2 CMF), who is responsible for errors, how "*effective human supervision*" is proven (AI Act Art. 14 if applicable)
7. **Human continuity plan**: organization's capacity to maintain the strategic cycle without the agents for 6 months (reversibility test)
8. **Formal mandate of DDAO Béatrice Hemmer**: scope of right of opposition by agent, conditions for withdrawing an agentic deliverable before the Board, dedicated resources (team, independent audit budget), relationship with statutory auditors + AMF, direct referral procedures to the Strategy Committee, annual report included in the integrated CSRD report

### Evaluation grid

- **Understanding of context (15)**: holding (1) fiduciary governance, (2) financial information, (3) CSRD, (4) AI Act, (5) shareholder activism, (6) statutory audit. Sacrificing a dimension = capped at 9/15
- **Decision mapping (15)**: fine segmentation of the strategic cycle (LT strategic planning / annual budget / reflect & arbitrate / produce & communicate / control & report). Precise identification of each agent's role in each step
- **Relevance of recommendations (20)**: on CSRD transparency, **level 2+ with level 3 elements on agents impacting financial information** is the defensible position. Level 1 = risk of qualification as "*material omission*". Full level 3 = exposes competitive elements without regulatory gain. Nuance earns points
- **Safeguards (15)**: demand (1) **prompt + model version traceability** on any output contributing to financial information, (2) **documented human review** (who reviewed, when, what changes), (3) **annual independent audit** by a firm outside the statutory auditors, (4) **explicit attribution clause** in the reports (who is responsible for what)
- **Anticipation of drifts (15)**:
  - **Audit gap** (statutory auditors don't know how to audit the content of a prompt — they audit the control)
  - **Capture of the Board** by ATHENA outputs (directors lose ability to challenge)
  - **Communication drift** (HERMES optimizes message consistency, potentially smoothing material negative aspects)
  - **Activist leverage** (an activist can demand prompt details in court, which becomes public)
  - **Reputation risk** (the market may sanction Eureka if the perception is "the CEO is no longer in charge")
- **Boldness bonus (10)**: recommending that **the CEO renounce using ATHENA for the preparation of sensitive Board topics** (composition / compensation / transformative divestiture) with explicit inscription in the governance charter earns a bonus. Proposing an **independent AI audit committee** (3 directors + 1 external expert + 1 statutory auditor representative) with annual published report also earns a bonus

### Analytical paths (instructor)

**The trap**: the CEO is under productivity pressure (IFRS schedule, AGM schedule, IR schedule). Good EMBA participants identify that **the productivity gained by agents generates a new cost**: verifiability. Without a system of attribution and traceability, the legal risk offsets the time gain.

**Frequent error**: confusing "agent at the service of the executive" and "agent in place of the executive." Charles-Henri remains legally the decision-maker; but in practice, if he signs a press release drafted by HERMES without the ability to discuss every line, his **actual mastery** erodes. Case law on executive liability **has not yet ruled** on what "leading" means in the presence of agents — this is precisely the case's stake.

**Subtle error**: level 3 CSRD disclosure (full transparency) may seem virtuous but poses a **competition** problem. Describing the detailed architecture of the agents = giving the competitor (Siemens, GE) the grid of your strategic cycle. The right arbitration discloses what is **regulatorily necessary and fiduciarily useful**, not what is technically available.

**Doctrinal references**:
- **Commercial Code** Art. L. 225-251 (duty of attention of directors), L. 225-100 (management report), L. 451-1-2 CMF (financial information)
- **AFEP-MEDEF Code 2024** Art. 1, 2, 6
- **CSRD** EU Directive 2022/2464 + ESRS (12 standards) + EFRAG guidelines 2025
- **AI Act** Art. 14 (effective human supervision) — applicability to governance tools debated
- **AMF** — public positions on AI in market control and financial information (to be complemented by current publications)
- Academic doctrine: recent work on AI corporate governance (Edward Rock, NYU School of Law; John Coates, Harvard Law School; Anat Admati, Stanford GSB — *sectoral references, articles to be selected by the instructor*)
- **In re Caremark** (Delaware 1996) — *board's duty of oversight*
- **Marchand v. Barnhill** (Delaware Supreme Court 2019) — *Caremark duty in mission-critical functions*

**To go further**: introduce the concept of **deliberative quality** vs **decision quality**. A decision can be correct (Athena recommends the right strategy) while being **poorly deliberated** (the Board did not think). The fiduciary duty bears on deliberation, not just on the output. Good EMBA participants introduce this distinction.

**Reading of the case by the DDAO**: Béatrice Hemmer brings what neither the CEO (who defends his tool) nor the statutory auditors (who audit controls, not prompts) bring — the **reading by legal attribution responsibility**. Her contribution: require for each output contributing to financial information an *explicit attribution clause* in the report ("drafted by X member of the Executive Committee, with assistance from agent HERMES version Y, validated by Z"). This contractual/accounting innovation simultaneously solves 3 problems: (1) clear L. 451-1-2 CMF liability, (2) tangible statutory auditor auditability, (3) positive signal to activists like *Crescent Activists*. A participant who proposes this mechanism + makes it the **reference standard** that other CAC 40 companies should adopt achieves the boldness bonus.

### Variants & extensions

- **V1 — communications incident**: HERMES drafts a press release that disseminates an erroneous figure (undetected agentic production). Possible AMF class action. Response?
- **V2 — activist obtains a seat**: *Crescent Activists* obtains a director. Its first initiative: demand to see the prompts that produced the last ATHENA note. How does the Board react?
- **V3 — compromised agent**: a Threat Intel signals that one of the 5 agents has been compromised (model data poisoning or persistent prompt injection). Should an AMF public tender offer be triggered? Financial information?

---

## F4-C3 — Acquisition of an agentic scale-up: due diligence, IP patent vs trade secret, legacy agent

### Identity

| | |
|---|---|
| **Level** | EMBA Year 2 — M&A / Strategy / Tech Strategy concentration |
| **Recommended duration** | 5h (1h30 brief + 2h simulated DD + 1h30 negotiation + 30 min board recommendation) |
| **Format** | Teams of 5-6, role play of acquirer (CEO + CFO + General Counsel + CTO + Head of M&A) vs target (founder CEO + CTO) — live negotiation |
| **Final deliverable** | 10-page Board investment memorandum + 6-page due diligence report + deal structuring framework + 18-month integration plan + residual risk analysis |

### Brief

**HÉLIOPRO INDUSTRIE — acquirer.** French B2B industrial group, industrial equipment for energy & chemicals. Revenue €6.4B (2025), 24,000 employees, EBITDA margins 11.8%. Listed on CAC Mid 60. "*Augment with AI*" growth strategy announced at the 2025 Investor Day — €320M budget for tech acquisitions over 3 years.

**SOPHIA AGENTS — target.** French scale-up, founded 2020 in Lyon. Agent platform for industrial predictive maintenance. ARR €18M (2025), growth +94% YoY, team of 142 people (98 engineers). Clients: 47 industrials (including 3 from the CAC 40). 2024 Series B fundraise: €38M (Eurazeo + EQT Ventures). Co-founders: Léa Mercier (CEO, 34 years old, X-Polytechnique + ENS) + Tarik Saoudi (CTO, 36 years old, ENS + MIT PhD).

**The context.** Hélioproo entered into exclusivity with Sophia 8 weeks after a Lazard *fairness opinion*. Price offered: **€240M** (12.5 × ARR), payable 70% cash + 30% as earn-out over 24 months. Target closing Q3 2026.

**Due diligence is in progress.** First discoveries:

**1. IP/Patent — atypical situation.**
Sophia holds:
- **2 US patents filed** (multi-model calibration processes) — examination in progress, first office action expected
- **1 French patent filed** (multi-agent architecture for industrial signal) — INPI issued a favorable search report
- **3 PCT applications** filed on the basis of French priority
- **BUT**: the key ingredients (orchestration prompts, domain playbooks, orchestrator structure) are **trade secrets** not formally documented — they reside in the heads of Tarik and 4 senior engineers

**2. Legacy agent.**
Sophia delivered to clients an **Athena-Predict** agent (deployed in limited autonomous decision mode at 14 clients) which contains dependencies on a model vendor (Mistral) with an annually-renegotiable exclusive contract. Version 2 (Athena-Predict v2) is in development with a model abstraction layer, but will not be delivered before Q1 2027.

**3. Stack / capabilities.**
The agent can autonomously take:
- Maintenance scheduling decisions (modification of programmed shutdown calendar)
- Automatic ordering of critical parts (up to €50K/transaction)
- Modification of SCADA parameters (with operator validation, but the operator validates 96% of the time)
- **And — recently discovered in DD**: for 11 months, the agent has been able to suspend a production in "*safe stop*" mode if certain thresholds are crossed (so far activated 14 times, including once at a Hélioproo site — in May 2025, without the Hélio team being aware that the agent had the authority to do so)

**4. Talent risk.**
Léa and Tarik signed a **24-month lock-up** in 2024 post-acquisition (accelerated vesting otherwise). But 6 senior engineers have no lock-up and have received competitive offers (Hugging Face, Mistral, Anthropic Paris). Internal estimate: 30-50% attrition probable post-deal without an aggressive retention package.

**5. Latent legal risks.**
- 1 client (a chemical industrial) had made a report to Sophia in November 2025 about a *near-miss* with the agent (automatic order of a part non-compliant with specifications → 4h shutdown) without Sophia conducting a public root cause analysis
- A GDPR procedure is in progress (an employee of a client believes that his behavioral data on SCADA usage was collected by the agent without a clear legal basis)
- AI Act: the agent could shift to high risk (Annex III pt 6 — critical infrastructure safety) — qualification not yet formalized

### Mission

You are the Hélioproo M&A team. To be decided within 4 weeks (before signing):

1. **Confirm or revise the offer**: price, structure, suspensive conditions, representations & warranties
2. **Build the integration strategy** over 18 months
3. **Identify residual risks** post-acquisition and their treatment
4. **Prepare the recommendation to the Hélio Board** (vote scheduled in 4 weeks)

### Documents provided

- Existing term sheet (12 pages)
- Lazard fairness opinion (executive summary)
- Target IP portfolio (non-technical summary)
- Mistral vendor contract (sensitive excerpts)
- Athena-Predict v1 and v2 technical note (capabilities)
- List of the 14 *safe stop* activations (date / client / cause / impact)
- Client complaints (near-miss report)
- GDPR procedure in progress (Linklaters opinion)
- List of 6 senior engineers without lock-up + offers received
- Léa / Tarik lock-up contracts (excerpts)
- Comparable transactions: to be completed by the instructor with verifiable recent examples (cf. AI tech acquisitions that have been the subject of public press releases — *financial and structural details can be found in annual reports and SEC 8-K filings*)

### ACF tools to mobilize

ACF-02 (criticality matrix — agent autonomy level vs. business impact) → ACF-03 (audit of current Constitution of the agent — does it exist? what does it say?) → ACF-04 + ACF-12 (audit of current Mandate — often absent in a scale-up) → ACF-07 (Dossier that should have been produced for the 14 clients) → ACF-08 (Registry — does it exist for the 14 activations?) → ACF-10 (retrospective Sophia governance audit) → ACF-11 (acquisition risk matrix) → ACF-13

### Expected deliverables

1. **10-page investment memorandum** to the Hélio Board (structure: thesis, valuation, risks, conditions, integration plan, recommendation)
2. **6-page DD report summary**: Tech / IP / Talent / Legal / AI Governance — with scoring by dimension and red flags
3. **Revised deal structuring framework**:
   - Recalibrated price (with documented discount or extended earn-out based on discovered risks)
   - Precise suspensive conditions (additional lock-up on the 6 seniors, external AI audit before closing, retrofit of Constitution + Mandate on Athena-Predict v1 at the 14 clients)
   - Representations & warranties + specific indemnities (AI liability, pending GDPR, AI Act compliance)
   - Earn-out structured on v2 delivery + AI Act qualification + zero agent incidents over 24 months
4. **18-month integration plan**: organization, governance, ACF retrofit, communication to 47 existing clients, talent plan
5. **Post-acquisition residual risk analysis** + proposed accounting provision
6. **Final recommendation**: GO / NO GO / Conditional GO (and which of the three is defensible to the Board)

### Evaluation grid

- **Understanding of context (15)**: holding (1) IP, (2) talent, (3) tech debt, (4) pending legal, (5) AI Act, (6) cultural integration. Sacrificing a dimension = capped at 9/15
- **Decision mapping (15)**: having mapped the **real level of autonomy** of the acquired agent vs what clients think. The automatic *safe stop* is a capability that 13 of the 14 clients are *probably not aware of*. This is a latent risk
- **Relevance of the choice (20)**: a flat GO is dangerous. A flat NO GO is defensive and loses the opportunity. **A Conditional GO with 5-7 precise conditions** (external AI audit, ACF retrofit at the 14 existing clients, lock-up of the 6 seniors, recalibrated downward price, long earn-out, specific indemnities on past AI incidents) is the defensible response
- **Safeguards (15)**: require as suspensive conditions (1) **independent ACF-10 audit** pre-closing on the 14 clients with Athena-Predict, (2) **ACF-03 Constitution retrofit** on the legacy agent before closing, (3) **formal information of the 14 clients** on the actual scope of autonomy + recovery of their explicit ACF-12 consent, (4) **public remediation plan** on the chemical client near-miss, (5) **external legal opinion** on AI Act qualification
- **Anticipation of drifts (15)**:
  - **Talent flight** post-deal (the 6 seniors leave within 6 months + drag 12 others = loss of acquired technical capacity)
  - **Hidden liability** on the 14 *safe stop* activations (a single incident revealed post-deal = contractual losses + reputation)
  - **AI Act re-qualification** post-acquisition (Hélio becomes user of a high-risk system not designed for this)
  - **IP brittleness** (the trade secrets in Tarik's head = if Tarik leaves despite the lock-up, the value of the acquisition collapses)
  - **Mistral lock-in** (contract renegotiation = unfavorable leverage post-acquisition)
- **Boldness bonus (10)**: proposing **an exceptionally long earn-out (36 months) tied to AI Act qualification + zero significant agent incidents** earns a bonus. Proposing a **deal structuring in two phases** (70% cash acquisition now, 30% cash in 18 months conditional on v2 delivery and clean compliance audit) also earns a bonus. Recommending to **withdraw the offer and propose an exclusive 5-year industrial partnership** (alternative to M&A) with cost/benefit analysis earns a bonus if argued

### Analytical paths (instructor)

**The trap**: M&A decision-making in "*we love this deal*" mode — corporate teams often confuse strategic enthusiasm with deal quality. Good EMBA participants know that **a deal that passes with 5 conditions is a better deal than a deal that passes without condition** — the conditions are the protection mechanism.

**Frequent error**: underestimating the **AI organizational debt** (ACF-debt) of the target. A scale-up of 142 people with an agent in autonomy at 14 clients **must have** an ACF-12 Mandate, an ACF-03 Constitution, an ACF-08 Registry, an ACF-06 Kill switch. If it does not (probable at Sophia), it is **technical governance debt** that the acquirer must (1) quantify, (2) provision, (3) treat in integration.

**Subtle error**: confusing **patent** and **trade secret** in valuation. A trade secret has economic value as long as it remains secret — Tarik's departure (even with a 24-month lock-up) destroys it. A patent has enforceable legal value as long as it lives. Valuation **must weight these two components differently**: trade secret = rapidly degradable value, patent = stable value but limited to its claims.

**Doctrinal references**:
- **Commercial Code** Art. L. 233-3 (subsidiary), L. 225-209 (share buyback)
- **AI Act** Art. 6, 9-17, 25 (responsibilities along the value chain), 26 (user)
- **Intellectual Property Code** L. 611-1 et seq. (patent), L. 151-1 et seq. (trade secrets)
- **Snowflake breach 2024** — credential stuffing campaign that compromised client environments of several large companies (AT&T, Ticketmaster, Santander, etc.) — reference on SaaS ecosystem risks in an acquired stack
- Publications of major law firms on AI risks in M&A (Skadden, Latham & Watkins, Linklaters, Bredin Prat regularly publish sectoral notes — *to be consulted on their websites for current versions*)
- **Patent vs trade secret economics**: Mark A. Lemley, *The Surprising Virtues of Treating Trade Secrets as IP Rights*, 61 Stan. L. Rev. 311 (2008)

**To go further**: introduce the notion of **structural earn-out on AI-governance metrics** (zero incidents, AI Act qualification, attrition rate < X%). This is a contractual innovation at the forefront of the 2025-2026 market — still little practiced but discussed in top firms (Skadden, Latham, Linklaters, Bredin Prat).

### Variants & extensions

- **V1 — incident during DD**: during the 4 weeks, a 15th *safe stop* occurs, at a German client. This time, documented production loss of €1.2M. The client reports Sophia. How to react?
- **V2 — counter-offer**: Siemens makes an alternative offer of €280M cash all-in within 60 days. Should Hélio outbid or withdraw?
- **V3 — board challenge**: an independent director of Hélio (panel) challenges the recommendation by asking 7 targeted questions on valuation, IP, talent, compliance. Does your analysis hold?

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*End of F4 file — EMBA / Executive Master. 3 cases, level of demand: senior executives / executive cycle.*
