French Insider-Trading Case Near Collapse on Privacy Ruling

(Bloomberg) -- France’s biggest insider-trading case may collapse after a court questioned whether evidence used to wiretap the burner phone of a man passing confidential tips from bankers to traders was obtained illegally.

The country’s top court said earlier this month that investigators at the Autorité des Marchés Financiers didn’t obtain proper authorization before requesting phone records for the traders at the heart of the probe. But rather than throwing the case out, the judges referred the matter to the European Union Court of Justice to decide whether the failings can be overlooked.

“The Cour de Cassation seems to be saying AMF investigators screwed up,” says Paris lawyer Jean-Didier Belot, who isn’t involved in the case. “But to prevent the investigation from falling apart, the judges have put questions to the EU courts in the hope that the probe can be preserved.”

At least eight people, including two former bankers, have been charged in insider-trading cases focused primarily on a failed oil services deal and Air Liquide SA’s takeover of U.S. chemical producer Airgas Inc. As part of the probe, cops wiretapped suspects and conducted raids in upscale ski resorts and tony Paris neighborhoods based on information obtained from the disputed phone records.

The setback in France comes after U.S. and U.K. authorities secured convictions in separate insider-trading cases. In January, an ex-Goldman Sachs Group Inc. banker pleaded guilty in New York to passing on tips and in London a trader was convicted last year of obtaining deal data from a UBS Group AG compliance officer.

Privacy Rights

Ever since they were charged in France three years ago, the two main suspects have been trying to chip away at the probe, arguing that investigators have run rough shod over their privacy rights. The case hasn’t gone to trial and the suspects deny the accusations.

Geneva traders Alexis Kuperfis and Lucien Selce argue requests to access their phone records should have been reviewed by an independent authority.

The phone records, with call details as well as their location, enabled investigators to deduce they were using other devices. That led to a burner phone belonging to a friend of Selce, a hair salon owner who was seen as the hub of a network funneling corporate secrets to traders.

The AMF said it doesn’t comment on court cases. Financial prosecutors at the Parquet National Financier declined to comment.

40 Cases

The AMF has previously told judges that losing the ruling would jeopardize more than 40 cases where suspects allegedly pocketed 80 million euros ($87 million) through insider trading.

Kuperfis’s lawyer says EU case law on privacy issues is clear and there was no need to reach out to the Court of Justice.

“It’s rather regrettable having to bother the CJEU to confirm something that has been established for many years,” Loïc Henriot said, referring to the EU court. The AMF’s methods to gather phone records weren’t in line with “European standards on the guarantees owed to any citizen in a democracy, in particular when it comes to privacy.”

With authorization to tap a number traced to Selce’s friend, investigators listened in on his calls in late 2015 with a specialist in acquisition finance at Societe Generale SA. The former SocGen banker is accused of having shared confidential details on the Airgas acquisition, including the target price.

Bad Habits

A lawyer for Selce, Frédéric Peltier, said the question put to EU courts “illustrates the reluctance of French judges to enforce applicable rules which they dislike because they disrupt their bad habits.”

Selce and Kuperfis are suspected of having making more than 12 million euros on the Airgas deal. Selce has also been charged over trades related to a failed oil services deal between CGG SA and Technip SA. That segment of the probe has also ensnared a former Merrill Lynch banker and an ex-Brunswick consultant.

Criminal authorities in France have had scant success with insider-trading cases. The most prominent case in recent years, involving top executives at the entity that became Airbus SE, collapsed in spectacular fashion in 2015 on double jeopardy concerns. Only two notable convictions were secured in the last few decades, one against Edgar Bronfman Jr., the former head of Warner Music, and the other against George Soros. But neither man served any jail time and both fines were reduced on appeal.

It’s unclear when the EU Court of Justice will review the questions it got in relation to the ongoing insider-trading case, but the Cour de Cassation has scheduled a hearing on Dec. 1 to assess procedural challenges.

©2020 Bloomberg L.P.

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