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A380 insider trading charges

December 2, 2013

A French court has ordered a trial for Daimler AG and the industrial conglomerate Lagardere SCA for insider trading. Prosecutors accuse executives of selling EADS shares in advance of a delay to a crucial plane launch.

An Airbus A380 lands after performing a display flight at the Farnborough Airshow 2012 in southern England July 9, 2012. (Photo REUTERS/Luke MacGregor)

On Monday, the Paris court called for a trial against French conglomerate Lagardere and German auto giant Daimler on charges of insider trading in the sale of shares in the aerospace and defense group EADS. In 2009, France's market regulator, AMF, had cleared Lagardere and Daimler, as well as 17 EADS or Airbus officials, in a separate inquiry.

"Daimler denies having committed any crime and was cleared by the AMF in the same case," company lawyer Aurelien Hamelle said Monday.

In addition to the two companies, the court ordered seven current or former EADS and Airbus executives to stand trial. They include John Leahy, the current Airbus chief operating officer for customers, and Noel Forgeard, the former EADS co-chairman, said Agnes Thibault-Lecuivre, the spokeswoman for the Paris prosecutor. Former EADS second-in-command Jean-Paul Gut, then-financial director Andreas Sperl, and three Airbus executives - Alain Flourens, Erik Pillet and Olivier Andries - also face trial.

The prosecutor accuses each company of selling 7.5-percent stakes in EADS in early 2006 in the knowledge that Airbus had encountered problems with the production of its A380 super jumbo jet. Daimler and Lagardere revealed the share sales on April 6, 2006. Two months later, Airbus announced a six-month delay in the first deliveries of the A380, which caused a sharp fall in EADS' share price.

The executives have claimed innocence.

'Privileged information'

When technical problems with the A380, the world's largest passenger airliner, became public in June 2006, EADS shares plunged 26 percent in one day. Executives had discussed technical problems at meetings on February 17 and March 1, 2006 - before the major share sales.

In 2009, AMF had ruled that regulators could not consider knowledge of the aircrafts' technical problems "privileged information," defined as "precise information that could have a notable influence on the share price of corresponding financial instruments."

That did not satisfy APPAC, a group of small investors who registered a criminal complaint that led to a probe by magistrate Serge Tournaire, who specializes in complex financial cases. Tournaire began investigating Lagardere and Daimler in 2011; on Monday, APPAC praised his decision to take the case to trial.

"We can accept that a director may make strategic errors but not that they or other administrators with access to privileged information can make profits on the back of the company and individual shareholders," the association said in a statement. "If very well-paid executives betray us, it is up to the courts to guarantee the rights of shareholders and the workforce."

Under French law, anyone convicted of insider trading could receive up to two years in prison and a fine of up to 10 times the amount deemed saved or gained as a result of illegal deals.

mkg/msh (Reuters, AFP, dpa, AP)