RichardPrice
Topic Author
Posts: 4474
Joined: Sat Apr 23, 2005 5:12 am

Forgeard Accused Of Insider Trading

Fri Jun 16, 2006 8:28 pm

In a twist to the recent A380 development problems, EADS CEO Noel Forgeard has been accused of insider trading when he sold shares in EADS earlier this year.

In total, 6 EADs executives were seen to sell shares during March 2006.

EADS has responded by saying that their executives were only allowed to exercise options within a very small timeframe each year, and that the first internal mention of further problems only arose in April 2006, too late for the share sales to be based on them.

http://news.bbc.co.uk/1/hi/business/5086152.stm

[Edited 2006-06-16 13:29:50]
 
Danny
Posts: 3714
Joined: Thu Apr 25, 2002 3:44 am

RE: Forgeard Accused Of Insider Trading

Fri Jun 16, 2006 8:46 pm

This is also reported here:

http://www.flightglobal.com/Articles...delay+before+April+EADS+share.html

Very stinky case. Yet another reason to get rid of him.
 
AerospaceFan
Posts: 6990
Joined: Thu Dec 22, 2005 1:43 am

RE: Forgeard Accused Of Insider Trading

Fri Jun 16, 2006 9:17 pm

Well, ABC News is reporting as follows:

Quote:
Small shareholder group France Petits Porteurs called on EADS to return any executive share profits and said its leaders should either be sacked for not knowing what was happening inside the factories or jailed for insider trading.

Forgeard dismissed the growing furor and said he had nothing to fear from any inquiry into insider trading.

Insider trading carries a maximum prison sentence in France of two years and a fine of at least 1.5 million euros, stretching up to 10 times the illegal profits, said Jerome Herbert, a securities lawyer at Winston & Strawn in Paris.

Source:

http://abcnews.go.com/Business/wireStory?id=2083805&page=1

Later in that same article, it was stated as follows:

Quote:
Forgeard said he was among six senior EADS executives who had exercised options or sold stock up to March 17.

He said it was three days later on March 20 that he had learned that core shareholders Lagardere and DaimlerChrysler had decided to reduce their stakes, and in April that he first heard of A380 wiring snags.

I think it would be of interest to learn why the wiring issues only came up, or came to his attention, in April, rather than much earlier in the process.
What's fair is fair.
 
Leskova
Posts: 5547
Joined: Wed Oct 08, 2003 3:39 pm

RE: Forgeard Accused Of Insider Trading

Fri Jun 16, 2006 9:19 pm

Like with other people in the same situation, I'm willing to give him the benefit of doubt... but if there's even one bit of proof that he should have known about it at the point he sold his shares, he should be removed from his post immediately.

Over the years, he's done a lot of good work for Airbus - I would be highly disappointed if this were the part that's remembered about him... but if it's true, then that's what he deserves.

... aside from all possible legal problems arising from his misconduct, if, indeed, he violated laws.

Since BaFin is mentioned in the Flight article, I had a look at the relevant paragraphs, and while I'm no expert at these things, I was able to locate paragraph 14 WpHG (Gesetz über den Wertpapierhandel) defining insider trading, as well as paragraph 38 WpHG stating that someone guilty of violating paragraph 14 Abs. 1 Nr. 1 (buying/selling shares based on insider knowledge) will face up to 5 years in prison.

Would be interesting to know what the French legal system defines as punishment...

Here's the full WpGH text (in German): http://www.bafin.de/gesetze/wphg.htm

I certainly hope that Mr. Forgeard will not have to find out more about the details of German laws in this regard...
Smile - it confuses people!
 
AerospaceFan
Posts: 6990
Joined: Thu Dec 22, 2005 1:43 am

RE: Forgeard Accused Of Insider Trading

Fri Jun 16, 2006 9:24 pm

Quoting Leskova (Reply 3):
Would be interesting to know what the French legal system defines as punishment...

Two years in prison and at least 1.5 million euros, up to ten times the amount of illegal profits, according to the ABC News article I cited above:

Quote:
Insider trading carries a maximum prison sentence in France of two years and a fine of at least 1.5 million euros, stretching up to 10 times the illegal profits, said Jerome Herbert, a securities lawyer at Winston & Strawn in Paris.

Source: Op. cit.

[Edited 2006-06-16 14:25:27]
What's fair is fair.
 
DAYflyer
Posts: 3546
Joined: Wed Sep 08, 2004 9:35 pm

RE: Forgeard Accused Of Insider Trading

Fri Jun 16, 2006 9:36 pm

I wonder how much of this is playing into the problems with the A380 and 350 programs.
One Nation Under God
 
AerospaceFan
Posts: 6990
Joined: Thu Dec 22, 2005 1:43 am

RE: Forgeard Accused Of Insider Trading

Fri Jun 16, 2006 9:41 pm

Quoting DAYflyer (Reply 5):
I wonder how much of this is playing into the problems with the A380 and 350 programs

That's an interesting question. The A350 wouldn't appear to be as challenging from a wiring standpoint, but it seems to me that there should be some independent technical inquiry, in addition to any legal, financial, or purely corporate investigations, as to why the design process for the A380 allowed the wiring issues to crop up so late in the game. Was this the subcontractor's doing? Was it an unforeseeable, or difficult-to-foresee, engineering issue? In any event, a similar mistake should be avoided in the future if at all possible.
What's fair is fair.
 
dl021
Posts: 10836
Joined: Fri May 21, 2004 12:04 pm

RE: Forgeard Accused Of Insider Trading

Fri Jun 16, 2006 10:34 pm

I wonder how this new controversy will affect EADS/Airbus internal management while they are sorting through this. Will Foergard be relieved of decision making responsibility while the investigation that will undoubtedly occur goes on? How about the others?

This looks very bad, since it's doubtful that anyone will be willing to believe that they did not know about the simmering issues since they're on top and get all the info prior to it being released to the rest of the world.

It's looking like it'll get ugly no matter what the legal results are.
Is my Pan Am ticket to the moon still good?
 
NAV20
Posts: 8453
Joined: Thu Nov 27, 2003 3:25 pm

RE: Forgeard Accused Of Insider Trading

Fri Jun 16, 2006 10:37 pm

Another story on the subject here. One bit of new information:-

"The French AMF financial market regulator on Friday issued a statement saying it has been inquiring into EADS for "several weeks." The "most recent events" will be included in this investigation into EADS share price moves, the regulator said."

http://www.marketwatch.com/News/Stor...4046-A6FE-38D5CD49DBDB%7D&keyword=

'Several weeks,' huh?
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
slider
Posts: 6805
Joined: Wed Feb 25, 2004 11:42 pm

RE: Forgeard Accused Of Insider Trading

Sat Jun 17, 2006 3:43 am

I can't believe after all the frenzied posting this week about Airbus' woes that this topic isn't getting more play.

This is potentially huge.

Forgeard ditches shares, EADS isn't advised of any delays for the A380, then the delays are announced--reluctantly--the A350 program is mired in uncertainty, the stock takes a big dump consequently, and Forgeard is in the middle of some very dubious timing as to the divesting of his shares.

More then coincidental. And lest anyone think this is a A vs B, or American vs European thing, I'd say the same thing if it were an American CEO shitbag too.
 
flyingdoctorwu
Posts: 271
Joined: Tue Feb 24, 2004 9:42 am

RE: Forgeard Accused Of Insider Trading

Sat Jun 17, 2006 3:58 am

Quote:
He said it was three days later on March 20 that he had learned that core shareholders Lagardere and DaimlerChrysler had decided to reduce their stakes, and in April that he first heard of A380 wiring snags.

So it looks like the CEO was notified in April of wiring snags.... when did they notify the Airlines...

It seems Emirates was kept in the dark until early June (this article if from June 13th.. right before the Fan was hit by the..)

Quote:
Mike Simon, Divisional Vice-President for Emirates Corporate Communications, however, said he did not expect the A380 delivery would be delayed further than the April 2007 deadline. Airbus originally wanted to deliver the planes about six months earlier.

Link

I think 2 months to inform your biggest customer is almost criminal... Airbus (and Boeing) need to be constantly in communication about the status of their order, especially a customer who has ordered 43 380 million dollar airplanes.
 
Leskova
Posts: 5547
Joined: Wed Oct 08, 2003 3:39 pm

RE: Forgeard Accused Of Insider Trading

Sat Jun 17, 2006 4:18 am

Quoting FlyingDoctorWu (Reply 10):
So it looks like the CEO was notified in April of wiring snags.... when did they notify the Airlines...

According to an article in Frankfurter Allgemeine, EADS was informed in April that there was a problem, but not of the extent; after informing EADS, Airbus had, according to a company spokesman, started analyzing the problems to find out how much impact it would have - and immediately after EADS was informed of the results, the airlines were as well; so, going by that article, I'd say EADS was notified a couple of days ago...

Here's a link to the article (sorry, only in German):
http://www.faz.net/d/invest/meldung.aspx?id=27863958
Smile - it confuses people!
 
AerospaceFan
Posts: 6990
Joined: Thu Dec 22, 2005 1:43 am

RE: Forgeard Accused Of Insider Trading

Sat Jun 17, 2006 4:26 am

Quoting Leskova (Reply 11):
According to an article in Frankfurter Allgemeine, EADS was informed in April that there was a problem, but not of the extent; after informing EADS, Airbus had, according to a company spokesman, started analyzing the problems to find out how much impact it would have - and immediately after EADS was informed of the results, the airlines were as well; so, going by that article, I'd say EADS was notified a couple of days ago...

In that case, it would be of interest whether the initial report was made in good faith, and also whether the various reports were reasonably accurate.

For example, if, hypothetically, the April report to EADS had been, "There is an issue with wiring; work is proceeding to determine extent"; and then two months later, the result was as it seems to be, then I think that, for one thing, it's question of fact as to what caused the initial report to begin with. It seems that the initial (April) report was not deemed important enough to provide it, or provide notice of it, to the airline-customers, if I'm reading the above correctly. The question I have is whether this was a reasonable choice.

How do things go from "not enough information to notify the airliners" to "bottleneck will cause six to seven month delay" in the space of two months?

Also, what happened in the intervening weeks from the initial April report through to the June "crisis"? Did top management keep tabs on the issue? Did it try to determine the possible severity of the problem? Did it consider issuing interim notices warning of the potential for a delay? Why or why not?

Who was minding the shop?

[Edited 2006-06-16 21:31:23]
What's fair is fair.
 
dallasnewark
Posts: 391
Joined: Tue Nov 08, 2005 4:33 pm

RE: Forgeard Accused Of Insider Trading

Sat Jun 17, 2006 4:34 am

Forgeard took a page out of Danny Kozlowski's book.
I'm not a psychic, but I see jail in his future
B732/3/4/5/6/7/8/9, B742/4, B752/3,B762/3/4, B772/3, A306, A318/9/20/21, A332/3, A343/6, MD80/83/88, L1011, TU104/134, F
 
texfly101
Posts: 343
Joined: Fri Jan 06, 2006 6:42 am

RE: Forgeard Accused Of Insider Trading

Sat Jun 17, 2006 6:15 am

It would appear to me that the problems that Airbus is facing were at least common knowledge to a lot of concerned parties prior to April. While not necessarily being made public, all the signs are there. Major stakeholders like BAE, Lagardere and DaimlerChrysler were reducing their shares and exposure early this year. Major execs were exercising their options, converting stock to money. Rumors of production problems and the consequent reassurances that everything was on track. And all this happening in the March timeframe, right before the April disclosures. So even if it is just a coincidence, which I have my doubts, just the taint of impropriety would deem a major mangement change. Phil Condit sure found out about this. Boeing is still trying to recover from their own set of management ethics scandals under his watch. Their EELV, KC767, and C-130 electronics contracts to name a few, all suffered from this and management heads rolled as a consequence. There is already a call for France's AMF and Germany's BAFIN to investigate the stock sales and timing. EADS has started their own investigation into the problems at Airbus. BAE is having to have an outside regulator determine the sale share price. And everyone is dumping the stock. So this is just the tip of the iceberg, it could be a really rocky couple of years. It will really be interesting to see how a call for full development money of $10-12 billion for the A370 will fall on governmental ears while EADS/Airbus is under tainted leadership. That alone might mean a management change, Mr. Forgeard's refusal to resign notwithstanding. Giving that much money to them might not sit very pretty with the opposition parties in the affected countries. Senator McCain sure made presidential hay in his accusations of Boeing malfeasance and investigations into thier business practices.
The Rueter's article discusses the EADS/Airbus items, its dated 6/16/06 and makes good reading.
 
Rheinbote
Posts: 1103
Joined: Sun May 21, 2006 9:30 pm

RE: Forgeard Accused Of Insider Trading

Sat Jun 17, 2006 6:24 am

Quoting FlyingDoctorWu (Reply 10):
So it looks like the CEO was notified in April of wiring snags.... when did they notify the Airlines...

It seems Emirates was kept in the dark until early June (this article if from June 13th.. right before the Fan was hit by the..)

Well, nowadays customer airlines seem to deploy a number of engineers with the manufacturer, either to support the design teams or to supervise integration work. Customer airlines should have been pretty much abreast of the situation at any time.
 
RIXrat
Posts: 670
Joined: Sun Nov 27, 2005 10:20 am

RE: Forgeard Accused Of Insider Trading

Sat Jun 17, 2006 6:43 am

As posted in another forum, here is the International Herald Tribune's take on Mr. Forgeard, his children and his associates, regarding the EADS stock sale:

http://www.iht.com/articles/2006/06/16/business/airbus.php
 
spartanmjf
Posts: 457
Joined: Fri Nov 11, 2005 11:31 am

RE: Forgeard Accused Of Insider Trading

Sat Jun 17, 2006 6:57 am

To suggest that the corporate parent wasn't aware of the extent of a manufacturing issue on a signature project as visible as the A380 is almost laughable.

The A380 represents a MASSIVE investment of financial, techincal, and human capital and, given the previous delay situation, EADS should have known and Airbus should have been in constant communication with EADS.

This is, at the least, a significant breakdown in management structure and communication.

At the most, if these reports of stock trading are true, it could involve criminal behavior on the part of multiple individuals.

Martha Stewart and her crowd got into trouble for stock issues involving a far lower profile situation and less money.
"Nuts to the man in 21D!"
 
BigSky123
Posts: 133
Joined: Tue Dec 27, 2005 2:33 am

RE: Forgeard Accused Of Insider Trading

Sat Jun 17, 2006 7:03 am

FlightGlobal has an interesting transcript of an interview with Forgeard regarding the delay:

http://www.flightglobal.com/Articles...ck+on+French+radio+transcript.html

Why is he saying 152 a380s "have been sold"? Are the other 7 orders still waiting to be finalised or where did the remaining 7 frames go?

[Edited 2006-06-17 00:05:12]

Who is online

Users browsing this forum: admanager, AJMntheSkies, Baidu [Spider], flyabr, gatibosgru, Google [Bot], Google Adsense [Bot], Google Feedfetcher, ha763, hOMSaR, hoons90, intsim, kaiserdelta, karungguni, LatinPlane, PanzerPowner, timberwolf24, TWA772LR, United1, Viscount724 and 233 guests