/ 4 October 2007

Media scent political scandal in Eads share probe

French newspapers mined the Watergate archive to describe the political ramifications of a share trading scandal enveloping Airbus parent Eads on Thursday, posing questions about ”Who knew what, and when?”

Blanket coverage of suspicions of ”massive” insider trading, which have been sent to prosecutors, focused on the risk of instability at Europe’s largest aerospace and defence group and the background role of French and German governments.

”Following suspicions of massive insider trading at Eads, the scandal is turning into an affair of state,” said tabloid Le Parisien under a bold front-page headline, The Affair.

Preliminary elements of what could develop into one of Europe’s largest insider trading investigations were sent to prosecutors by the French stock market regulator AMF in September and disclosed by Le Figaro newspaper on Wednesday.

Investigators cited 21 current and former executives at Eads or Airbus and industrial shareholders DaimlerChrysler and Lagardere, a judicial source confirmed to Reuters. Lagardere denied wrongdoing, Eads expressed surprise over the report’s publication and DaimlerChrysler declined comment.

The AMF’s interim report does not make any formal accusations, but its existence dominated Thursday’s front pages.

The AMF’s investigation focuses on whether managers and shareholders knew of a wave of industrial problems on the Airbus A380 superjumbo when they sold shares in the Spring of 2006. Disclosure of the troubles in June that year hit Eads shares.

The French government distanced itself from the growing scandal on Wednesday, saying it had never sold any of its 15% stake in Eads since the group’s creation in 2000, and could not be connected with any accusation of insider trading.

But editorialists highlighted the government’s proximity to Eads and a history of political interference in the company, which had split into rival French and German camps. Many said the question was how early the government knew something was up.

”The French state is also in the firing line,” said Les Echos financial daily in an editorial. ”Certainly, it sold no shares. But it is not above suspicion. [If] it knew what was happening at Airbus it did not play its alerting role.”

Like most dailies, La Tribune pushed the industrial and financial investigation into the centre of French politics.

Eads: from insider trading to an affair of state, the newspaper said in its front-page headline.

New affair

The word ”affair” has clear echoes in France of other scandals which rippled outwards from industry to threaten political careers: the 1990s Elf bribery scandal which brought down a foreign minister and the ongoing Clearstream scandal involving attempts to smear President Nicolas Sarkozy through fake accounts in the Luxembourg-based settlements bank.

Unlike the Watergate scandal, most of the senior personalities in government have changed since the original events occurred. But the same political family is in power.

Opposition Socialist leader Francois Hollande said in an interview with Le Parisien that the government must take responsibility for the A380 and share trading fiascos and publish details of what the finance ministry knew at the time.

Thierry Breton, who was finance minister at the time of the looming A380 problems, has denied having advance knowledge.

Analysts have until now been mostly sanguine about the impact of the affair on Eads, saying the market was focusing on its restructuring plans. But French media warned of a general state of paralysis that could cripple Eads decision-making.

La Tribune said the sheer scale of the list of people suspected, including many of the top management at Eads, would make it difficult to impose sweeping sanctions without decapitating Eads, but could trigger renewed in-fighting.

Left-wing Libération, however, looked askance at the revelations, speculating they could reflect enmity among France’s industrial and political elite.

Several newspapers are owned by France’s aerospace leaders including Lagardere and rival Serge Dassault, who owns Le Figaro, which broke the news.

In Germany, newspapers focused on car firm DaimlerChrysler, which is part of an Eads shareholder pact alongside the French state and French media group Lagardere.

”Above all, Daimler must answer questions about what it knew when the company sold its multi-billion Eads stake in April 2006,” said Handelsblatt daily in an editorial. It warned of a backlash as Airbus sheds 10,000 jobs to restructure itself. – Reuters