An investigation by the Paris stock market regulator has concluded that seven former and current European Aeronautic Defense and Space Company (EADS) executives engaged in insider trading.
The A380's delay is at the heart of the investigation
In a report released to news agencies late on Tuesday, the Financial Market Authority (AMF) stock market regulator said Chief Executive Noel Forgeard and six other current or former executives of the aircraft manufacturer engaged in insider trading when they used advance knowledge of a delay in the Airbus A380 program to sell company stock.
The AMF report stated that the men made millions of euros in total by exercising company stock options in March 2006 - with knowledge that the Airbus A380 project would be delayed - before a formal announcement of the delay was made.
Once the problems with the A380 became public on June 13, 2006, EADS shares plummeted.
The AMF has the authority to fine each of the seven men, who also include the former EADS deputy chief executive, Jean-Paul Gut, and Andreas Sperl, the former chief financial officer of Airbus and current head of an EADS plant in Germany, up to 1.5 million euros ($2.14 million).
The probe is one of two parallel investigations into alleged insider trading at Airbus parent company EADS, the other is a criminal inquiry.
EADS vows to defends its execs
EADS vowed to stand behind the executives named in the report.
Forgeard is the most prominent of the accused
The company said: "EADS will continue to defend itself and will demonstrate the validity of all its arguments... the company will also continue to bring its support for the defense of the individuals concerned.
"EADS reiterates that the principle of presumption of innocence prevails until any final decision is taken and reaffirms its confidence in the managers concerned in this issue," the company added in a statement.
Those accused will have a chance to put their case to the AMF at a hearing scheduled for late November, sources close to the inquiry told reporters. Some of the men are already under investigation as part of the criminal inquiry.
Apart from Forgeard, Gut and Sperl, the executives named are Airbus commercial director John Leahy, former Airbus vice president Olivier Andries, former Airbus human resources director Erik Pillet and Airbus Centers of Excellence chief Alain Flourens.
The biggest fines recommended by the AMF are for Forgeard (5.45 million euros), Leahy (3.6 million euros) and Gut (1.1 million euros).
Enders, majority shareholders cleared
The report cleared Enders of any involvement
The report found current EADS chairman Thomas Enders, as well as major shareholders Lagardere SCA and Daimler, had not engaged in insider trading.
A spokesman for Forgeard told AFP: "We will show that the (seven) people targeted should, like the industrial shareholders and the other directors, be placed entirely beyond suspicion."
The accusations came on the same day that EADS reported a 76-percent jump in net profit for the second quarter but a 23-percent fall in operating profit in the six months ending in June as a result of the global economic crisis.
"We won't know the full impact and the length of the financial crisis until next year," EADS chief executive Louis Gallois told a meeting with analysts, adding however that there was "no panic on the market."
Editor: Chuck Penfold