UPDATE 1-EADS founders to face trial in insider case

Mon Dec 2, 2013 12:15pm EST

By Tim Hepher and Gérard Bon

PARIS Dec 2 (Reuters) - Two founding industrial shareholders of Airbus parent EADS will join a group of current and former managers on trial in a long-running insider trading case, prosecutors said on Monday, but EADS called for charges to be dismissed.

In the latest twist to a saga that has haunted EADS ever since its A380 superjumbo hit unexpected development delays in 2006, an official at the French public prosecutor's office said French media group Lagardere and German carmaker Daimler would stand trial.

Lawyers involved in the case reiterated that seven current and former managers including Airbus sales chief John Leahy also face trial over share trades carried out before the announcement of delays led to a sharp fall in the EADS stock price.

Leahy, who like other individuals involved in the case has firmly denied wrongdoing, could not be reached for comment.

But both EADS and Lagardere expressed surprise that the case was still being played out in the courts despite the parties having been cleared by stock market regulators in 2009.

Without naming individuals, EADS also expressed support for managers involved in the case. Leahy, a U.S. citizen, is one of the industry's most high-profile figures and the most senior executive connected to the case still employed by EADS.

"It is EADS' view that all concerned parties should be exonerated in line with the 2009 decision of the (AMF)," an EADS spokesman said in an emailed statement, referring to the French stock market regulator's decision that year to exonerate the company and its executives after a three-year investigation.

"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," the EADS spokesman added.

Lagardere referred questions to its lawyer, who said it "notes with surprise the investigating magistrate's decision to put various shareholders and managers of EADS on trial".

In Stuttgart, a spokesman for Daimler said: "We can confirm the existence of the charge; we do not yet know the details of the document, and we will therefore examine the allegations."

No trial date has been fixed, the Daimler spokesman added.

The judicial and regulatory probes were triggered after EADS suffered a 26 percent fall in its share price in June 2006 following the announcement of worsening delays in the A380. The world's largest airliner eventually entered service in 2007.

The AMF said in Dec. 2009 it had not found any evidence that Leahy and others who exercised share options in the weeks and months before the announcement knew at the time about the extent of problems then threatening the A380 project.

Groups representing small shareholders protested about the decision and said the judicial investigation should continue.

Lagardere and Daimler, originally the core industrial shareholders of EADS, have since exited the group as part of a broad restructuring of its ownership in the past year.

Insider trading is punishable in France by a fine worth up to 10 times the amount gained from the transactions and - in the case of individuals - up to two years in prison.

The amount involved in dealings by current and former EADS executives, and the former industrial shareholders, is not contested but French law requires prosecutors to prove that any gains resulted from "privileged information".

In 2007, Leahy said the sheer scale of people involved in company share schemes who were originally suspected of having access to such information - some 1,200 people - proved the allegations of dealing on inside information were false.

Also involved in the case is former Airbus chief executive, and later EADS co-chief executive, Noel Forgeard who has also denied any wrongdoing. Forgeard was not available for comment.

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