"Massive insider trading" at EADS

PARIS — Just as Airbus began selling its oft-delayed superjumbo as a success story, a report of "massive insider trading" at parent company EADS was leaked to the media Wednesday, raising the question of whether the beleaguered company can ever get ahead of its problems.

The preliminary report by a stock-market regulator, suggesting EADS executives sold shares and exercised stock options after learning about major delays to the A380, came less than two weeks before a glitzy ceremony marking the delivery of the first superjumbo to Singapore Airlines.

EADS Chief Executive Louis Gallois, who did not sell shares at the time, tried to downplay the findings, which judicial officials said Wednesday had been delivered to the prosecutor's office.

Gallois said his job is to ensure that managers aren't distracted by the negative publicity and get on with the job of competing with U.S. rival Boeing and selling planes.

"We are entering the period of convalescence," he said during a debate on relations behind the Franco-German consortium that runs European Aeronautic Defence & Space (EADS).

"I would prefer that they talked about us for other subjects ... but it is not me who makes the news," Gallois said.

EADS said in a statement it is "most surprised" by the leaked reports, which it considers "an unlawful violation of the confidentiality of the current investigations and of the principle of the presumption of innocence."

The Financial Markets Authority, or AMF, has been investigating for more than a year how much executives and board members knew about profit-damaging delays to the A380 when they sold shares or exercised stock options worth several million euros between November 2005 and March 2006.

French daily Le Figaro, which claimed to have seen the preliminary report, said the problems linked to the A380 and the midrange A350 were raised in an EADS board meeting as early as July 2005.

The public announcement about the investigation came in June 2006, sending EADS shares crashing 26 percent in one day.

Gallois, named to head Airbus after the suspected problems, refused to comment on the contents of the AMF report, noting only that it is preliminary.

He took over as sole CEO of EADS in August in a management overhaul designed to end national rivalries.

Airbus and EADS have been shaken over the past year and a half by management strife, the insider-trading accusations and the strong euro, which hurts revenue from plane sales as they are priced in dollars.

The Toulouse, France-based company has been ceding its position as the world's dominant plane maker to Boeing, and foresees thousands of job losses and several factory closures.

The world's largest plane is two years late due to wiring difficulties and communication failures between Airbus plants in Germany and France.

The first delivery of the 525-seat plane is scheduled Oct. 15 to Singapore Airlines, the first of 14 customers who have ordered the A380.

The AMF's preliminary report says the host of the handover ceremony, Airbus' then-CEO Noël Forgeard, and other top executives sold shares and exercised stock options based on their knowledge of the A380's difficulties, according to Le Figaro.

Filings that the AMF has made public said Forgeard and his children exercised stock options at a profit of 2.5 million euros ($3.2 million) in March 2006.

Forgeard has denied wrongdoing, saying he knew about production difficulties in April, a month later.

The AMF also says the decision by EADS shareholders DaimlerChrysler and French conglomerate Lagardère in March 2006 to sell stock must have been prompted by expectations it would fall, Le Figaro reported.

The news pushed shares of Lagardère down almost 6 percent to close at 58.45 euros ($82.79) in Paris and prompted the company to say it will take legal action over the "unfounded accusations."

EADS shares reacted calmly. They fell 0.7 percent to close at 21.71 euros ($30.78) — still far below their level above 30 euros at the time of the stock sales in 2005 and 2006.

Associated Press reporters Angela Charlton and Verena von Derschau contributed to this report.