Who Knew What, When?

What if you knew about the A380 production delays three months prior to the public announcement and subsequent stock freefall of 26 percent? What would you have done with your shares of stock?

An investigation of EADS insider trading uncovered a taped telephone call about those production delays, reports Bloomberg.

In December, ANN reported the execution of search warrants at EADS' Paris office and shareholder Lagardere SCA, part of an ongoing investigation into suspected corporate misconduct and insider trading linked to A380 production delays.

Prosecutors had opened an investigation in November 2006, five months after word spread that fired EADS co-CEO Noel Forgeard and several colleagues sold off company stock ahead of an internal investigation into problems with the A380. Lagardere also sold off EADS shares at that time, as did Germany's DaimlerChrysler AG.

Spokesmen for Lagardere and DaimlerChrysler declined to comment at the time.

According to regulatory filings, in March 2006, Forgeard sold shares worth 5.2 million euros ($7 million) for 2.5 million euros ($3.4 million) in gains. He resigned on July 2, after EADS shares fell 26 percent with the June 13 announcement that A380 delays would cut operating profit by 2 billion euros ($2.6 billion) by 2010.

France's stock market regulator, the AMF, is investigating the executives' share sales as part of a separate probe.
 
Small shareholders were not given "the slightest indication of a possible delay on the A380 program" at the annual general meeting in March, according to the insider trading lawsuit filed by Appac, a French shareholder group.

Jean Galli Douani, who was unsuccessful in purchasing Airbus planes, said May 2 that he met with French financial police for two hours at the request of investigating Judge Xaviere Simeoni.

Douani reported that he had taped a phone call with an Airbus executive about the A380 discussions at the March 2006 meeting.

"I told them (the police) that I had this conversation," Douani said. "I gave them audio evidence."

Douani said investigators listened to a 20-minute recording of an October call on his cell phone with Alain Garcia, then the executive vice president of engineering at Airbus.

Douani said he told police that company executives met in Amsterdam on March 7, 2006, and discussed "the technical problems at Airbus and the only problem was the A380."

The Paris prosecutors' office declined comment on whether Douani was interviewed.

In attempting to revive the defunct French airline Air Liberte, Douani had tried to buy four smaller Airbus planes. He said he called Garcia, requesting the return of technical documents he had submitted in application for the lanes, recording the call for use in his efforts to reclaim said documents.

A lawyer at EADS' law firm said French law prohibits the use in court of a phone call that was recorded without the consent of all parties.

EADS spokeswoman Gaelle Pellerin declined to comment on Douani's claims. She also made note of an April 25 statement denying a French media report that Garcia spoke about the A380 problems at that March 7, 2006, meeting.

Garcia reportedly "recalls the conversation, but not the content," according to EADS lawyer Thomas Baudesson, of Clifford Chance law firm in Paris.

According to Baudesson, Garcia, now technical adviser to Airbus CEO Louis Gallois, attended the Amsterdam board meeting for a presentation on research and development, "not the A380."

Garcia also referred to the April 25 EADS statement, adding, "I am not going beyond that."

Garcia joined Airbus in 1969 and is retiring at the end of June, according to an April 10 press release.

FMI: www.airbus.com, www.eads.com