Iliad chairman fined €600,000 for insider trading

UPDATE: UBS and bankers cleared - Maxime Lombardini had unfair advantage when he sold Iliad shares ahead of T-Mobile US stake bid

Bid leaked after UBS worker saw messages on Lazard dealmaker's phone on Eurostar trip. AP

Iliad chairman Maxime Lombardini was fined €600,000 (Dh2.45 million) by French regulators who accused him of insider trading shortly before the telecommunication company made a surprise 2014 takeover bid for T-Mobile US that sent his company's shares tumbling the most in almost eight years.

Mr Lombardini had an unfair advantage over other traders when he sold Iliad shares that he and his girlfriend owned only a few weeks before the $15 billion bid for a majority stake in T-Mobile US, the enforcement committee of France’s markets regulator ruled.

The contentious trades enabled Mr Lombardini to avoid a loss of €185,768 for himself and €11,425 for his partner, the Autorite des Marches Financiers (AMF) agency said on Monday.

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

Iliad, which was founded by French billionaire Xavier Niel, was fined €100,000 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, Mr 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 for T-Mobile US 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: that gives you an idea of the state of advancement of the project,” Mr Lombardini said in March.

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 operator’s stock fell 7 per cent 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.

Mr Lombardini joined the French telecom in 2007 as chief executive, a position he held for more than a decade. He was replaced by Thomas Reynaud after Iliad announced its first loss of broadband subscribers.

UPDATE:

UBS and two bankers were cleared by French enforcers after facing accusations of inappropriately obtaining a tip about a secret $15bn Iliad takeover plan and then approaching the French carrier to offer financing.

At the heart of the case is a Eurostar trip between London and Paris five years ago where former UBS investment banker Alexandre Zaluski caught glimpses of messages that popped up on his neighbour’s mobile phones. A Lazard dealmaker on the train was working on an attempt by Iliad to take over T-Mobile US, and was unknowingly also providing Mr Zaluski a window into the deal.

It was part of Mr Zaluski’s job as an investment banker to share the tip with his UBS colleague and telecom sector specialist Christian Lesueur, the Autorite des Marches Financiers’ enforcement committee ruled. Similarly, Mr Lesueur can’t be criticised for putting together a team of a dozen UBS bankers, briefing them, and making a financing pitch with Iliad.

UBS representatives declined to comment on Monday’s ruling, as did lawyers for Mr Zaluski and Mr Lesueur. Neither of the bankers had been accused of making any illicit trades based on the non-public information.

Mr Zaluski no longer works at UBS. He has denied any wrongdoing, saying he treated the information confidentially on a need-to-know basis only and arguing that his seatmate blamed him for his own failure to guard the secrets. Mr Lesueur said he was doing what he would be expected to do: collect information in order to drum up new business.

On July 15, 2014, Lazard dealmaker Vincent Le Stradic boarded a train in London and didn’t pay attention to his neighbor during the two-and-a-half-hour trip, the AMF case heard.

Sitting alongside Mr Le Stradic, Mr Zaluski saw snippets of messages on his phones but was unable to make sense of the piecemeal information into the deal, which would be announced two weeks later. The UBS banker decided immediately to reach out to Mr Lesueur, head of telecom, media and technology for Europe, Middle East and Africa at UBS.

It didn’t take Mr Lesueur long to understand what was afoot: Iliad was planning to force its way into the US market by taking a majority stake in a wireless provider much larger than the French company.

On July 31, 2014, Iliad issued an after-market confirmation of the offer it had made about a week earlier but the bid for a controlling stake was rejected by owner Deutsche Telekom, forcing Iliad to drop its American ambitions.

In the AMF case, investigators had accused UBS of being imprudent in sharing the tip on the upcoming bid with a dozen of its bankers - paving the way for a possible leak. The allegations were dismissed by the enforcement committee as unfounded after the bank’s lawyer, Thierry Gontard, pointed to procedures in place at UBS to avoid insider information to spread.

While Mr Le Stradic wasn’t accused of any wrongdoing, AMF enforcers did note his “negligence” in Monday’s decision.