PARIS – Seventeen current and former executives at Airbus parent company EADS went on trial Monday for allegedly making millions in profits on the back of their company's troubles with the delayed A380 superjumbo project.
French stock market regulators suspect EADS officials of insider trading as they sold stock options before the planemaker announced a big production delay that sent shares plunging.
It is an unusually visible case for France's Financial Markets Authority, or AMF, and could result in embarrassing fines for European Aeronautic Defence & Space Co. NV, one of the continent's biggest manufacturers.
The AMF is holding closed-door proceedings all week in the building that long housed the Paris stock exchange. Monday's session focused on procedural issues. The pointed questions about the A380 are expected later in the week, according to an AMF official. The official was not authorized to be publicly named because of the regulator's rules.
The French market regulator has been investigating for nearly three years what the EADS executives and board members knew about profit-damaging technical problems with the A380 superjumbo and mid-range A350 aircraft when they sold shares or exercised stock options worth millions of euros (dollars) in 2005 and early 2006.
When the A380 problems were made public in June 2006, EADS shares plunged 26 percent in one day and the company sank into months of management troubles.
Two investigations into the stock trades ensued, one by the AMF and a criminal probe by the Paris prosecutor that is still under way. Both may demand millions of euros (dollars) in fines, and the criminal probe may even seek prison terms.
The AMF probe earlier named 17 EADS and Airbus officials as suspects, but chief investigator Antoine Courtault winnowed the list down to seven people he accuses of insider trading: former EADS co-CEO Noel Forgeard; Jean-Paul Gut, a former deputy chief executive who oversaw strategy; chief Airbus salesman John Leahy; Andreas Sperl, director of the EADS site in Dresde; Olivier Andries, a former EADS vice president; human resources director Erik Pillet, and Alain Flourens, in charge of training centers.
The investigator recommended that the 10 other suspects be exonerated, though all 17 will be on trial this week, according to the AMF official.
The AMF is not required to heed the chief investigator's recommendations.
"I come here serene," Forgeard told reporters as he arrived for the hearing. "I am fully confident in the jurisdiction of the AMF to whom my lawyers here have provided all the elements that show my innocence."
EADS would not comment on Monday's proceedings.
EADS is also named in the case, accused of not informing the markets sooner of the problems with the A380. EADS shareholders Lagardere SCA and Daimler AG also face questioning, though the chief investigator recommended exonerating them.
The investigator said he had no proof of insider trading concerning delays in the construction of the A350 airliner.
The AMF is under pressure to show its independence when dealing with such a major company.
The AMF official said the hearings are the regulator's equivalent of a judicial trial and will form the basis for any sanctions, which must be decided by the end of this year. Each of the seven could be fined up to euro1.5 million ($2.14 million).
The case comes as EADS is in a battle with Airbus rival Boeing Co. for a $35 billion Pentagon contract. EADS and partner Northrop Grumman Corp. are hoping to win the bidding to replace 179 aging Air Force refueling tankers.
EADS shares closed up 2.2 percent at euro13.01 in Paris trading Monday.