Iliad Chairman Fined for Insider Trades for Him and Girlfriend

(Bloomberg) -- Iliad SA Chairman Maxime Lombardini was fined 600,000 euros ($670,000) by French regulators who accused him of selling some shares before the phone company’s stock tumbled the most in almost eight years when it made a surprise 2014 takeover bid for T-Mobile US Inc.

Lombardini had an unfair advantage over other traders when he sold Iliad shares that he and his girlfriend owned just a few weeks before the $15 billion bid for a majority stake was made public, the enforcement committee of France’s markets regulator ruled.

The contentious trades enabled Lombardini to avoid a loss of 185,768 euros for himself and 11,425 euros for his partner, the Autorite des Marches Financiers committee said Monday. Iliad and a lawyer for Lombardini declined to immediately comment.

The Lombardini case is part of an AMF probe that included a look into how the bid was leaked during a Eurostar trip from London to Paris. During the journey, a UBS Group AG banker caught a few glimpses of messages that popped up on the phone of his unsuspecting neighbor, a Lazard Ltd. dealmaker and close financial adviser to Iliad.

Iliad, which was founded by French billionaire Xavier Niel, was fined 100,000 euros by the AMF’s enforcement committee for delaying a statement to the market by a few days regarding its interest in T-Mobile US. The company previously rejected the accusations as “unfounded.”

During a March hearing, Lombardini also denied any wrongdoing. The Iliad chairman said he “did, of course, think things over before selling the shares” but felt he could proceed given the “very slim” chances of success of a bid. He pointed to the lack of synergies in a cross-border acquisition and the unwillingness of the American company’s owner to sell.

“There wasn’t even a confidentiality agreement set up with Deutsche Telekom AG: that gives you an idea of the state of advancement of the project,” Lombardini said in March.

The AMF’s enforcement committee said that Lombardini is at fault in this instance even though the sale was part of a strategy of exercising stock options and then selling them that was decided before he had any insider information.

“It was up to him to stop the sale” once he was made aware that Iliad’s board had given the go-ahead to work toward making an offer, the French enforcers said in their ruling.

The AMF committee also rejected arguments put forward to account for the sale of his partner’s shares, explaining that she needed liquidity to settle an upcoming tax bill. In that respect, the enforcers noted that Lombardini’s girlfriend reinvested the funds by acquiring shares of rival French telecom operator Orange SA less than two weeks later rather than setting the money aside.

On July 31, 2014, Iliad issued an after-market confirmation of the offer it had made about a week earlier. The following day, the French carrier’s stock fell 7 percent in Paris amid fears Iliad would be dragged into a bidding war. A few days later, the offer -- and an improved bid -- for a controlling stake was rejected by T-Mobile’s owner, forcing Iliad to drop its plan to enter the American market.

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