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Police Detain Ex-EADS Boss Forgeard

The former co-chief executive of the European aerospace giant has been interrogated by French police over suspicion of insider trading

Coincidences can sometimes be symbolic in an unfortunate way. Former EADS co-chief executive Noel Forgeard has been in a tight spot lately — with both police and stock market regulators — over allegations he conducted insider trading at the company he formerly led. The one-way street he had to drive down for his questioning late Wednesday was almost as tight as his personal situation — there wasn't even room to park his Smart car as the 61-year-old and his attorney tried to enter the building.

His interrogation by financial regulatory authorities began inconspicuously. He wore a brown sports coat and entered the building accompanied solely by his lawyer. The French stock market regulatory authority AMF and police are accusing Foregeard of selling shares between 2005 and 2006 with insider knowledge. Forgeard is accused of having sold large numbers of shares, earning him millions of euros just days before announcing major delivery delays on the A380 superjumbo jet.

So far, Forgeard has strenuously denied the allegations. In the course of the interrogations, however, it has been clear that investigators are little moved by his version of events. On Wednesday, he was taken in by the police for questioning, meaning that he can be held for up to 48 hours if a court doesn't intervene.

In addition to the financial police, AMF has also initiated sanctions measures — not just against Forgeard, but also against 17 other EADS managers including current Airbus CEO Thomas Enders, who sold two share packages before the A380 crisis began. An AMF report that has also been given to public prosecutors identifies "massive insider trading" within the company from 2005-2006.

The drama began to unfold on March 7, 2006, when the EADS executive board held a decisive meeting. According to the French daily La Tribune, the company's leading executives for the first time openly addressed the issue of possible delivery problems with the A380. The paper claims board members had discussed "significant" delays on the A380 program as well as "Airbus' serious industrial difficulties."

The result of the meeting: Instead of the 29 planes planned for delivery the next year, only 24 could be completed. But that information was not included in the minutes of the supervisory board meeting.

Executives certainly respsonded, but their actions were apparently focused on the stock market. On the same day, top EADS executives began selling company stock options. Co-CEO Forgeard apparently led the pack, allegedly earning profits of €2.5 million ($3.92 million) for shares he sold throughout the month of March.

EADS marketing and strategy chief Jean-Paul Gut is also said to have earned €1.15 million, and four other members of the EADS board appear to have made profits of between €365,000 and €1.2 million. The German chief executive of the company's defense division, Stefan Zoller, allegedly turned a profit of €492,880.

Foul Play Also Suspected at Daimler

EADS first went public with the A380 problems on June 13, 2006 — three months after the board meeting. The company's share price fell by 26 percent. Since then, the responsible executives have been suspected of having withheld important information from the stock market and enriching themselves with their insider knowledge.

The scandal has grown since then, too. A shadow has also been cast over EADS' main shareholders, Germany's Daimler and France's Lagardère. Both companies respectively sold shares worth 7.5 percent of the EADS total unexpectedly early in April 2006. Investigators with the French stock market regulator allege that Daimler executives had known about the A380 problems from the time of the decisive executive board meeting on March 7, 2006.

The insider trading allegations have been further fuelled by a statement made by former EADS co-CEO and current Airbus chief Thomas Enders, known inside the company as "Major Tom." He told a news agency at the end of 2006 that, unlike the other executives, he didn't sell shares because, "I didn't consider it opportune at the time based on the information before me."

A €6 Million Severance Package

But it didn't help Enders because French stock market regulator AMF also began investigating his own sales of shares in October 2007. The last time he sold shares in EADS was in November 2005. He has argued that there had been no way of foreseeing the A380 debacle at the time.

AMF inspectors are currently investigating 17 managers as well as Daimler and Lagardère. Everyone named in the investigation has strictly denied the allegations. But even former French Prime Minister Dominique de Villepin is alleged to have known about the controversial share sales. At least that's what major EADS shareholder Arnaud Lagardère claims, though Villepin has denied the accusation. If the allegations are confirmed, the executives could face millions in fines and even prison sentences.

But the people with the greatest price to pay for the executive failure are EADS employees. The problems with the A380 last year forced EADS subsidiary Airbus to introduce the "Power 8" restructuring program. It's core element: The elimination of 10,000 jobs. The only person that program has aided is former CEO Forgeard. According to press reports, the executive got a golden parachute severance of upwards of €6 million.

Provided by Spiegel Online—Read the latest from Europe's largest newsmagazine

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