December 17, 2009 / 11:58 PM / 10 years ago

Dramatic win for EADS in French share probe

PARIS (Reuters) - Airbus parent EADS won a firm victory on Thursday when regulators cleared the company and current and former bosses of insider trading and market abuse, ending a three-year probe that has cast a pall over the group.

The probe was triggered after EADS suffered a 26-percent fall in its share price in June 2006 after announcing worsening delays in deliveries of its A380 superjumbo.

France’s AMF regulator said it had not found any evidence that 17 people who exercised share options in the weeks and months beforehand knew about the problems threatening Europe’s largest industrial project when they sold shares.

Those cleared include current Airbus Chief Executive Tom Enders and the former co-chief executive of EADS, Noel Forgeard, who resigned shortly after the share plunge and later faced a political storm over the size of his pay-off.

Forgeard and four others still face a criminal probe but are likely to receive encouragement from the AMF’s final report.

The watchdog also formally cleared the company’s core industrial shareholders, German carmaker Daimler and French media group Lagardere, both of which sold 7.5 percent stakes in EADS in April 2006.

The AMF had narrowed its focus to 7 out of the original 17 suspects, including Airbus sales chief John Leahy. But he too was cleared in the report. Leahy, an American, had vehemently denied insider trading, as did all the other suspects. Several also protested about leaks linking them to the AMF probe.

EADS was cleared of misleading financial markets over the extent of delays to the A380, the world’s largest airliner.

It welcomed the AMF’s decision and said it was confident it would be cleared in other proceedings related to the case, but declined further comment.

The relief inside the Franco-German-led group triggered by the collapse of the AMF’s case was evident, however.

“We didn’t expect to get as much as this,” a lawyer close to the aerospace group said.

The largest ever case tackled by the AMF had been seen as a test of its muscle and had triggered a high-stakes battle between the regulator and one of Europe’s largest companies — a scenario that in Europe is often seen as recipe for compromise.

The move does not yet lift EADS out of the legal woods but eases an issue that had forced the company to remain more inwardly focused than it would have liked, after moving to try to heal internal splits and simplify its management last year.

It also reduces one potential stumbling block in securing business deals in the United States, where it is battling Boeing for a major defense deal, and elsewhere, anlaysts said.

“It deprives the pro-Boeing crowd of one argument they would use to keep EADS out of the US market. But they’ll find other reasons to keep trying,” said Richard Aboulafia, aerospace analyst at Teal Group in Washington.

However, a leading French critic and campaigner for small investors called the AMF decision a “true scandal.”

“This will have a catastrophic effect on public opinion,” Colette Neuville, head of minority shareholder association ADAM, told Reuters. “Keep moving, there is nothing to see here — that is what we are being told,” she added.

Production on the A380 superjumbo hit problems in 2006 when engineers found that wiring prepared in Germany did not fit planes being assembled in France due to incompatible software.

The plane entered service in December 2007 but is still slipping behind schedule and testing budgets due to the amount of customisation requested by buyers. EADS is expected to take a new charge on the A380 this quarter due to cost overruns.

Airbus has also said it expects to miss its latest delivery target of 13 aircraft for 2009 by one or two planes. A source familiar with the matter said it would likely deliver a further three in December, bringing the annual total to 10.

EADS shares closed up 2.4 percent before the AMF verdict was announced at 12.95 euros in Paris.

Additional reporting and writing by Tim Hepher, Julien Ponthus; Editing by Richard Chang, Bernard Orr

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