Chairman Gallois Calls Findings "Preliminary"

In what analysts see as a tremendous blow to aerospace giant EADS, the French government says investigators have determined "massive insider trading" was conducted by 21 top managers in both 2005 and 2006.

The Associated Press reports investigators point to the way EADS executives sold some of their shares in the Airbus parent as a strong indicator of insider trading.

Expecting company shares would fall, the French government accuses them of selling "forward" -- scheduling 2007 transactions at higher 2006 prices. Investigators say that's a good indication those managers knew of trouble on the horizon and were trying to protect their own financial positions.

Investigators at the French Financial Markets Authority are forwarding the allegations to prosecutors in Paris, saying in a statement that the facts in this case are "likely to be qualified as criminal," according to the AP.

EADS CEO Louis Gallois says the findings are "preliminary" in nature.

Shares in French EADS partner Lagardere appear to have taken the largest hit from the news. Fears of a looming insider trading scandal caused stocks to dip six percent in trading Wednesday, according to Thompson Financial.

Rumors of insider trading at EADS first surfaced in May 2006, when several top-level executives sold off their shares at just the right time... right before news of a second delay to the Airbus A380 program became public.

As ANN reported, the ensuing scandal led to the resignations of former EADS co-CEO Noel Forgeard (shown at right) and Airbus chief Gustav Humbert... and prompted investigations from both French and German sides of the aerospace consortium.

FMI: www.eads.com