http://www.larouchepac.com/news/2007/10/16/eads-scandal-and-insiesta.html European Aeronautic Defense and Space Co.: Scandal and "Insiesta" By Jacques Cheminade October 15, 2007
The scandal today striking the European Aeronautic Defense and Space Co., EADS, shares a point in common with the scandal that yesterday ended with the ruin of Eurotunnel's shareholders: when a public service is diverted, and a cabal of private interests is allowed to do what ought to be undertaken by a public enterprise, economic and social disaster becomes inevitable. For EADS, it is clear that the disaster ended up with restructuring the company, with 10,000 lay-offs at stake, and a change in management at the Caisse des Dépôts et des Consignations (CDC), the state-run savings bank being the big loser in the whole affair, thus "justifying" for the most profitable activities of this old savings banks be handed over to the private sector, supposedly more reasonable. Thus, the "mistakes" of the public sector under the influence of private interests, would serve as the pretext for more privatizations! It is revealing to recap the various stages of the affair: (1) The 1999 deal between the French and the Germans. Since the Germans at the time could not accept the fact that the French state should be mixed up in the firm's management, the French state benefitted to outrageously favor its friend Jean-Luc Lagardère. Hence, the state and Lagardère, each with a 15% share, put their share in a holding (Sogeade), which is represented the EADS board of directors by one of its vice-presidents who is none other than... Jean-Luc Lagardère. The latter, formerly of the very small Matra firm, thus took control of Aérospatiale, the French public-sector giant. This scandal is the "mother" of all scandals to come. (2) From November 2005 to March 2006: The Winter of `Stock Options' >From the early 2000s, the executives and directors of EADS opportunely took >stock options (the option to buy a certain number of shares at a set price and >to sell them at market value after a given term, with the number of stock >options increasing with individual's position in the hierarchy). Note, that at two points, November 2005 and March 2006, about 1,200 executives sold their stock options, making huge capital gains--EU90 million euros in total--without spending a dime of their own. Over March 8-24, 2006, Noel Forgeard, former EADS executive vice president, also sold his stock options, making a capital gain of EU2.5 million for himself and EU1.2 million transferred to his children to avoid capital gains tax. Especially, Arnaud Lagardère, Jean-Luc's heir, notified the state on March 8, 2006, that his group was selling half of the EADS shares it possessed, altogether 7.5% of the total. On April 4, the sale took place. Ixis Bank, a subsidiary of the Caisse d'Epargne, was given charge to redeem the stock for EU32.60 each and to reallocate the proceeds. The Caisse des Dépôts et de Consignations (CDC) bought 2.25% of Jean-Luc Lagardère's 7.5% share. Immediately afterward, EADS stock plunged, bottoming out at EU18 per share (today it stands at EU22.5). The CDC had to cover EU190 million in losses and the Lagardère group made over EU700 million! In short, by buying these stocks, the state-run CDC bank, permitted a private investor, Lagardère, to make quite a profit! 3) 2007: The Financial Markets Authority Intervention The AMF sent the case to the law enforcement authorities and the testimony of the principal players before the Senate and the Finance Committees was broadcast by the parliament's TV network. What had been known to only thousands of initiates became public: then Finance Minister Thierry Breton was accused of having enriched a private shareholder to the detriment of the state. The question is the following: Did Breton and CDC know that EADS' Airbus, unable to sell its A350, had had to launch the A350 XWB, at twice the cost of some EU10 billion, and especially that delivery of the A380 was suffering from many delays? These two facts--and especially the second--are what sparked the collapse of EADS stock, between March and June 2006. Thierry Breton denied everything, saying he was unaware how serious the situation was at EADS, and that he had only learned about the 2.25% sale to CDC from the press. This line of defense doesn't hold, especially since there is precedent involving the then-minister, the Rhodia affair, from which he came out clean only with great difficulty. Add to that, as then France Télécom CEO, he was accused, with Jean-René Fourtou, in the Nagra affair, for illegal arrangements having to do with GSM mobile phone standards. Three points are incriminating in the EADS case: First, the former minister had in his possession a Jan. 20, 2006 note from the Agence des Participations de l'Etat (APE--State Shareholding Agency), advising him to sell part of the state's 15% share in EADS. It indicated to him that the price of the stock would fall. Then, Lagardère sent a confidential memorandum dated Feb. 21, 2006, to the Matignon, the Prime Minister's Office, detailing the stock sale he was preparing, and cites the CDC savings bank as being one of the potential buyers. Last, as far as CDC goes, for those in the know, "the whole state knew that CDC would buy." Further, CDC's current boss, Augustin de Romanet, was at that time the deputy secretary general of the Elysee, and was closely following the EADS case. By affirming that "the state was unimpeachable" in the case, Thierry Breton is acting with a certain boldness. That is where the case stands, poisoning Franco-German relations against the background of rivalries between Daimler and Lagardère, and throwing suspicion on the aerospace industry as a whole. If this were the occasion to put things back in order and return the French state to its responsibility, we would approve the opportunity being seized. Unfortunately, things do not seem to be heading in that direction. The state, majority owner in Sogeade, left the presidency to Arnaud Lagardère. This "insiesta"--incest between the financial and political milieu against the backdrop of a strategic siesta--continues still. Sure, it is said that Sarkozy today is annoyed by the man whom yesterday he proclaimed "his brother." However, even if a pawn were sacrificed -- in any case, Arnaud Lagardère is mainly involved in sports and media--nothing would be settled at bottom. The financier synarchy is silent, for the moment is staying in place. And finally, as we said in the beginning, the failure of the CDC-- steered by the powers that be--would seem to serve as a pretext for realizing the ultra-liberals' dream: to hand over to the private sector the most profitable part of the old banking house's business. The fact that it had been Marcel Dassault's Le Figaro that had leaked the whole affair makes one wonder: The siesta of reason, in which the state indulges, will it engender new little monsters? That is ground on which the political battle will be fought--which we will fight--for control and for public services at this late hour in history. The world is faced with the immediate threat of a financial crisis, and a military conflict in Iran. The time has come to that we return to being serious and sovereign on what is at stake.
