Former AIT bosses found guilty of market abuse

Former AIT bosses found guilty of market abuse

Two former senior executives of UK CRM vendor AIT have been found guilty of "recklessly" making misleading statements to investors in a landmark case brought by the Financial Services Authority.

AIT's former chairman and chief executive Carl Rigby, 43, and ex-finance director Gareth Bailey, 36, each face a possible seven year prison sentence after being convicted of criminal market abuse at Southwark Crown Court following a three-month trial. However both men were cleared of a second count which alleged they "knowingly" misled the market.

The firm's ex-sales director Alistair Rowley, who was charged with market abuse along with Rigby and Bailey in December 2004, was cleared on both counts.

The case centred on an interim statement to the stock exchange in May 2002 in which CRM vendor AIT reported a positive end to the financial year and forecasted profit of £6.7m. But the statement included three new business contracts which did not exist. The bogus contracts had a total value of £4.8m.

Two weeks after releasing the interim statement, AIT's stock dropped 80% in a single day after it issued a profit warning stating that it would not meet projected revenue targets. Within a month the shares plummeted in value again after a preliminary audit uncovered further shortfalls in revenue and accounting irregularities.

AIT was evenutally rescued by company founder Richard Hicks under a refinancing package that diluted the value of shares held by existing investors. The vendor has since changed its name to Portrait Software in a bid to escape its past and develop more positive branding.

Both Rigby and Bailey will be sentenced on 7 October.

The trial was the first contested criminal prosecution brought by the FSA. In a statement, Margaret Cole, director of enforcement, FSA, says: "This case demonstrates the FSA's willingness and capability to take all necessary action in pursuit of its objective of maintaining market confidence, including prosecuting criminal charges against individuals where appropriate."

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