Former AIT directors charged in first market abuse case

The Financial Services Authority yesterday launched its first ever criminal case against directors suspected of market abuse, charging the former chief executive and two directors of the struggling software company AIT Group of misleading investors in 2002.

Carl Rigby, who used to be chairman and chief executive of AIT, Gareth Bailey, the company's ex-finance director, and the former sales director, Alistair Rowley, are accused of issuing a positive stock exchange statement in May 2002 which they knew did not reflect the true, far worse, state of AIT.

The three, who have left the company, face up to seven years in prison and unlimited fines under the FSA's market abuse powers, which were awarded to it in 2001.

Mr Rigby and his former colleagues appeared at the City of London Magistrates Court to hear a series of charges read out. They will be tried at Southwark Crown Court, with the case beginning on 2 March.

According to the FSA, the three "recklessly" made the stock exchange announcement on 2 May 2002 saying AIT's trading was in line to meet market expectations. This was a statement the group "knew to be misleading", the FSA said.

The FSA also alleges that, from October the previous year to May, the group "conspired to make the statement" to the market about AIT, which produces software for the financial sector to manage relationships with customers.

Mr Rigby, 41, Mr Bailey, 35, and Mr Rowley, also 41, spoke only to confirm their names and addresses at yesterday's hearing.

More than £80m was wiped off the share price of AIT after it admitted four weeks after the trading statement that profits would in fact be significantly below expectations and that its own directors would have to stump up £700,000 to fund the business in the short term.

AIT was forced to launch a £20.5m rescue financing package in August 2002 after it issued two profits warnings.

Its dramatic collapse in value was embarrassing for analysts who had favoured the stock. UBS, AIT's house broker had a price target of 950p for the stock in June 2002. A few weeks later they had collapsed to 96.5p.

Sir Howard Davies, who stepped down as chairman of the FSA last year, has said that the City watchdog was probing 13 cases of possible market abuse. Sir Howard's replacement, Callum McCarthy, told MPs in October last year that those cases were nearing completion.

AIT is one of that group. Separately, another case of alleged market abuse, involving Paul Davidson, nicknamed the Plumber, has also become public. The FSA sent a letter to Mr Davidson last October warning him he was in line for a

£750,000 fine - the largest ever handed down by the FSA to an individual.

The move followed an investigation into a spread-bet he had taken out in Cyprotex, a biotech firm he founded.

Mr Davidson has refused to pay the fine and instead is taking the FSA to a tribunal. It has also been reported that he intends to sue the body.

The FSA has beefed up the number of people working on investigations and increased its budget since it was created four years ago.

The FSA gas faced attacks from MPs, who have accused it of being "asleep on the job" and "comatose" for not reacting speedily enough to the mortgage endowment mis-selling scandal.