Charges of insider trading at EADS stir outrage in France
PARIS: The leak of an official report detailing suspicions of widespread insider trading at EADS - with possible collusion by government officials - triggered paroxysms of recrimination across France on Thursday, even before any formal charges.
The front page of the conservative newspaper Le Figaro described the French market regulators revelations as a “shock wave,” while the business daily La Tribune and the popular Le Parisien tabloid warned that all the ingredients were in place for the scandal to become an “affair of state.”
The dramatic plot line of this unfolding saga, involving the parent of the plane maker Airbus would be gripping enough anywhere, with a cast of characters drawn from the financial and political elite of Europe and with astronomical sums of money involved in developing and selling aircraft and weapons systems. But the as-yet unproved disclosures of suspect share trades while the state shareholder turned a blind eye to an industrial crisis, conform to a view that many French already have: of a national corporate culture that is inherently corrupt and where capitalism serves the interests of a well-connected few at the expense of rank-and-file employees and credulous pensioners.
Airbus is in the midst of a massive restructuring of its European operations that foresees the loss of as many as 10,000 jobs and the sale of as many as seven factories.
“Its easy to understand the outrage of the employees, subjected to tough - but necessary - restructuring, when they contemplate what happened here and there at the helm of the company,” the French newspaper Le Figaro wrote in an editorial Thursday. “The example of EADS will certainly not help to boost the image of business.”
That would be bad news at a time when the new administration of President Nicolas Sarkozy was aiming to pass a number of pro-business measures to stimulate economic growth.
Dominique Reyniй , a professor of political science at the Institut dЙtudes Politiques in Paris, said, “This will revive deep-seated clichйs about the antagonism between the little man struggling to make ends meet and an unscrupulous business class getting rich. In a country like France this can only increase the suspicion people feel towards capitalism.”
Le Figaro, which was shown a copy of the preliminary report by the Financial Markets Authority, reported Wednesday that as many as 21 top managers at European Aeronautic Defense Space and its aircraft subsidiary, Airbus, may have been aware of serious problems with the production of the A380 superjumbo jet when they exercised EADS stock options from November 2005 to March 2006, months before the planes difficulties became public in June 2006.
In its submission to prosecutors, the regulator also included a December 2005 memo addressed to Thierry Breton, then the French finance minister, warning that EADS would soon enter a “zone of turbulence” and advising the government to pare its 15 percent stake, the newspaper said.
Breton has denied wrongdoing and described the states conduct in the matter as “irreproachable.” The current French finance minister, Christine Lagarde, told Parliament Wednesday that a ministry department did recommend in January 2006 that the government cut its EADS stake, but that this advice had been based on the stocks high valuation at the time and “exclusively on financial information available to the public.”
Breton ignored his advisers recommendation, but his failure to sound the alarm about Airbus has led some to accuse him of complicity in the affair.
“The French state is also in the firing line,” the business daily Les Йchos wrote in an editorial. “Once informed of the problems at Airbus, it did not signal an alert, which its responsibilities as a shareholder should have led it to do.”
On Thursday, the president of the finance committee of the Senate, Jean Arthuis, said that he would call a series of public hearings about the EADS case beginning Wednesday. Breton and his former cabinet director, Bruno Bezard, would be among those asked to testify, Arthuis said.
Tales of insider trading at EADS tap into a deep vein of French cynicism about institutionalized corruption of the kind demonstrated most memorably by Captain Louis Renault, the fictional chief of the Casablanca police, who was shocked - shocked! - to find gambling going on inside Ricks Cafй Amйricain, just as he was handed his roulette winnings for the evening.
The French can perhaps be forgiven their sense of dйjа vu. In 1988, a close friend of then-president Franзois Mitterrand and a former prime ministers chief of staff shared inside knowledge of an impending acquisition by the French aluminum maker Pechiney of American Can. The investigation, which dragged on for 11 years, resulted in the first criminal convictions in the country for insider trading.
