Ex-AIT directors 'deceived' shareholders, court told

Three former directors of the software company AIT made "deceptive, misleading and false" statements to the market, a court heard yesterday. The three, who are being prosecuted for market abuse, potentially face up to seven years in jail if found guilty.

Three former directors of the software company AIT made "deceptive, misleading and false" statements to the market, a court heard yesterday. The three, who are being prosecuted for market abuse, potentially face up to seven years in jail if found guilty.

William Boyce QC, representing the Financial Services Authority in its first criminal prosecution for market abuse, told the court yesterday the defendants deliberately misled the market by stating their company's profits were in line with expectations, when all three knew they were not.

Carl Rigby, the former chief executive and chairman of AIT, Gareth Bailey, the former finance director, and Alistair Rowley, the former sales director, took the stand at Southwark Crown Court, on the first day of a trial expected to last up to four months.

The trio are formally charged with "recklessly making a statement, promise or forecast knowing it to be misleading, false or deceptive in material particular to ... the Financial Services & Markets Act 2000".

Mr Boyce told the court that the directors had issued the false trading update, on 2 May 2002, based on three new business contracts which did not in fact exist at the time the announcement was made.

Four weeks after the initial statement, AIT issued a profits warning, conceding that one of the three contracts - with the Dutch firm Centraal Beheer - had not yet been sealed and could not be included in the accounts for the year to 31 March 2002. Two weeks later a further profits warning was made, stating that contracts with Datapoint and St James's Place would also not be included in the 2002 accounts. AIT's shares fell 80 per cent on the day of the first profits warning, and continued to deteriorate after the second.

Mr Boyce told the court the defendants had collaborated to make the false statement, and did not inform the other directors of the company's predicament. "It is not proper to include in accounts for one year, sales which did not take place," he said. "[The directors] made an announcement that there was to be a satisfactory year-end ... dependent on each of the three contracts being in their accounts for the year end March 2002. In the case of Centraal Beheer, there was no such contract. In the case of Datapoint, there was no such contract. In the case of St James's Place, there was no such contract."

The defendants deny any wrongdoing. The case continues.