PARIS -- French conglomerate Lagardere (IW 1000/431) and German auto giant Daimler (IW 1000/18) have been sent for trial in France for alleged insider trading in the sale of shares in aerospace and defense group EADS (IW 1000/52).
Noel Forgeard, the former joint chairman of Airbus parent company EADS, and John Leahy, the current Airbus chief operating officer for customers, will also face trial, along with five other executives, judicial sources said.
Under French law, anyone convicted of insider trading is liable for up to two years in prison and a fine of up to 10 times the amount deemed to have been saved or gained as a result of the illegal deals.
Lagardere and Daimler, who both vigorously contest any wrongdoing, are alleged to have sold 7.5% stakes in EADS in early 2006 based on the knowledge that Airbus was encountering problems with the production of its A380 super jumbo.
The two groups 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.
France's stock market regulator AMF carried out an investigation into the conduct of Lagardere, Daimler and 17 EADS executives. The regulator concluded in 2009 that there was no evidence any of the shareholders had sought financial advantage through the illegal use of privileged information.
That did not satisfy a group of small investors, APPAC, who registered a criminal complaint that led to a full-blown probe by examining magistrate Serge Tournaire, who specializes in complex financial cases.
Investor Group Hails Magistrate's Decision
Tournaire charged Lagardere and Daimler in 2011, and his decision to take the case to trial was praised on Monday by APPAC.
"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."
Lagardere and Daimler both protested their innocence.
"After having been cleared by the stock market authorities in the different countries concerned, and notably by the AMF, Lagardere notes with surprise the judge's decision to take various shareholders and executives of EADS to trial," said Jean Weil, the group's legal representative.
Daimler's lawyer Aurelien Hamelle added: "Daimler denies having committed any crime and was cleared by the AMF in the same case."
The other five executives who will be tried are former EADS number two Jean-Paul Gut; the financial director at the time, Andreas Sperl; and three Airbus executives: Alain Flourens, Erik Pillet and Olivier Andries.
EADS said in statement: "EADS reiterates its full support of and confidence in its concerned managers, and remains confident that they will once again demonstrate that these accusations are groundless and should be fully dismissed."
Copyright Agence France-Presse, 2013