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In the Know?

DW staff (jp)October 4, 2007

An insider trading scandal has erupted at the European Aeronautic Defense and Space Company (EADS), threatening to overshadow the launch of its star product, the super-jumbo A380, later in October.

The Airbus A380
Times remain turbulent for the Airbus A380Image: AP

France's stock market regulator, AMF, compiled a report alleging that company executives at EADS knew about the extent of the difficulties of subsidiary Airbus' A380 super jumbo when they started selling their personal shares, a French newspaper reported Wednesday, Oct. 3.

Prosecutors had sent the report to a judge who has spent a year looking into allegations of illegal share dealing at EADS, Paris daily Le Figaro wrote.

EADS has been suspected of insider trading ever since the company plunged into crisis over delays to Airbus' prestigious A380. The value of EADS shares had collapsed when Airbus first announced delays in 2006. Months later, Airbus formally announced serious production difficulties.

Suspicious activities

Management and shareholders at EADS engaged in massive insider trading by selling shares before the problems at Airbus were made public, Le Figaro said. A total of 1,200 alleged cases of insider trading of the shares were detected, but the regulator decided to move quickly by concentrating on 21 people, including executives at EADS and Airbus as well as major shareholders.

The paper also wrote that AMF described the selling of shares, which allegedly took place between November 2005 and March 2006, as "simultaneous and massive."

Further press reports said the document cites former Airbus chief executive and EADS co-chief executive Noel Forgeard, who resigned in July last year amid a scandal over the timing of his share dealings and problems with the A380. Also named were current Airbus chief Thomas Enders and a number of other current and former directors.

"Unfounded accusations"

Former EADS joint CEOs Thomas Enders, left, and Noel Forgeard
Former EADS joint CEOs Thomas Enders (left) and Noel ForgeardImage: AP

The judicial probe was opened in November 2006 in response to complaints, notably from Appac, an association of small French shareholders.

Judges assigned to the case have since ordered searches to be carried out at the headquarters of EADS and one of its principal shareholders, French media and defense company Lagardere.

"EADS is most surprised by the publication of information in the press," said an EADS statement, condemning what it called "an unlawful violation of the confidentiality of the current investigations and of the principle of the presumption of innocence."

The major industrial shareholders of EADS, German car giant DaimlerChrysler and Lagardere, each sold 7.5 percent of their holdings on April 4, 2006, for 2 billion euros ($2.8 billion).

While DaimlerChrysler has refused to comment, AFP news service reported that Lagardere said it would launch legal action for damages caused by "interpretations" of a preliminary AMF document that had led to "unfounded accusations."

Government awareness

While Lagardere controls 7.5 percent and DaimlerChrysler 22.5 percent of EADS in order to preserve a Franco-German balance within the group, 15 percent is owned by the French government.

According to Le Figaro, the AMF report alleged that Paris had been made aware of difficulties at EADS before the company's public announcements.

This threatens to create a political storm in France.

Economics Minister Christine Lagarde has denied any insider trading by the government, stressing that the state "never sold a single share," according to AFP.