Three former senior executives of UK CRM vendor AIT deliberately misled shareholders by falsely stating the company's profits were in line with expectations, a London court was told yesterday, the opening day of a prosecution brought by the Financial Services Authority (FSA).
AIT's former chief executive and chairman Carl Rigby, ex-sales director Alistair Rowley and former finance director Gareth Bailey were charged with market abuse back in November in the first criminal prosecution of its kind in the UK. The three were each charged with two counts of making misleading, false or deceptive statements.
On the opening day of the trial, which is expected to last four months, a jury at Southwark crown court was told that the directors had issued a false trading update on 2 May 2002 claiming three new business contracts that the prosecution alleges did not exist at the time. The bogus contracts had a total value of £4.8m.
But two weeks after releasing the update the company had four fifths of its stock market value erased after warning investors that it was running out of cash and would not meet revenue targets. Within a month the shares had halved in value again as a preliminary audit uncovered further shortfalls in revenue and accounting irregularities.
William Boyce QC, representing the FSA, told the court the defendants had collaborated to make the false statement and did not inform the other company directors or outside advisors of the situation.
All three deny the charges. If found guilty they each face up to seven years in prison.