Former EADS chief targeted in share probe

PARIS (Reuters) - Former EADS (EAD.PA) co-chief executive Noel Forgeard has been placed under formal investigation on suspicion of insider trading while at Europe's largest aerospace group, his lawyer said on Friday.

Two judges are investigating the selling of stock in 2006 by people inside EADS, weeks before the Franco-German-Spanish company's Airbus unit unveiled delays to its A380 superjumbo.

The "shocked" 61-year-old was freed on bail in the early hours of Friday on condition that he pay a sum yet to be specified, his lawyer Jean-Alain Michel said.

Forgeard had been held in police custody for around 36 hours before appearing in front of judges late on Thursday.

The announcement of worsening delays in building the world's largest airliner wiped a quarter off the value of EADS (EAD.PA) shares in June 2006 and triggered Forgeard's resignation.

EADS shares were 2.2 percent higher at 14.75 euros by 0702 GMT on Friday, boosted by a dip in high oil prices which had raised concerns over the capacity of cash-starved airlines to renew their fleets.

Forgeard and other current and former executives have denied knowing about the A380 delays when exercising their right to trade stock in March 2006. EADS also has denied wrongdoing.

Forgeard's lawyer said he had been cleared on a second count requested by prosecutors, that of misleading financial markets.

Being targeted for formal investigation in France is a step short of charges and does not imply guilt or necessarily lead to trial. Insider trading carries a maximum of two years in jail and a fine of up to 10 times the share trading profits.

Forgeard is the first person to appear before judges in an investigation that could embrace executives still at EADS.

Last month French regulator AMF wrapped up the exploratory phase of its own 18-month trading investigation and said it had found enough evidence to send a file on 17 current and former executives to prosecutors and its own sanctions service.

Core shareholders Lagardere (LAGA.PA) and Daimler (DAIGn.DE), which sold shares in April 2006, were also named in the AMF enquiry which looked at how much everyone knew of delays to the A380 and design problems on the A350 as far back as 2005. Both companies have denied breaking any rules.

Forgeard was placed in police detention on Wednesday but spent that night in hospital due to slight respiratory problems.

His lawyer said he had found the experience of being held in a sparse police cell "overwhelming."

"When you are someone like Mr Forgeard, who has had an exceptional industrial career, it's very difficult to find yourself in detention... but he has courage and he survived the shock. He has good morale," Michel said.

"I am convinced we will succeed in demonstrating that he didn't commit insider trading. We have very good evidence to prove that," the lawyer added.

POWER BATTLE

Forgeard ran Airbus from 1998 to 2005 and rose to become co-chief executive of EADS following a public power battle in which former president Jacques Chirac, whom Forgeard had once served as an industrial adviser, intervened on his behalf.

Forgeard shared power at EADS with a German co-CEO, Tom Enders, under a system agreed between France and Germany when EADS was created out of a merger of sensitive assets in 2000.

But Forgeard's time at the top was marked by in-fighting with the German camp, echoing national rivalries that many blamed for the A380 delays and ultimately sped up his departure.

Forgeard was thrust into the spotlight again last year when it emerged during presidential elections that EADS had given him a pay-off of 8 million euros in 2006. Critics contrasted the sum with plans to cut 10,000 jobs at Airbus after the A380 crisis.

Forgeard defended his record in building Airbus into a powerful competitor to Boeing (BA.N) and said he was determined not to be made into a "scapegoat" for problems at EADS.

In a bid to end chronic squabbling inside one of Europe's biggest industrial groups, France and Germany agreed last year to scrap the dual management system at EADS and appointed Frenchman Louis Gallois as the company's sole chief executive.

Visiting the French aviation capital of Toulouse on Tuesday, Gallois declined to comment on his predecessor's plight.

"It is not my place to comment. Noel Forgeard is no longer employed by EADS. Being detained for police questioning does not mean someone is guilty," Gallois said.

Gallois said he had "full confidence" in EADS management.

(Editing by Carol Bishopric and Jason Neely)