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César Alierta, executive chairman of Telefónica, the Spanish telecommunications group, has been charged with insider trading in connection with alleged improper share trades when he was chairman of a tobacco company.
The public prosecutor's office is seeking a four-and-a-half-year jail sentence for Mr Alierta, the most senior executive ever charged with insider trading in Spain.
The prosecutor's office is also requesting the seizure of €1.86m ($2.27m) of profits Mr Alierta is alleged to have made from trading in Tabacalera shares when he was chairman of the Spanish tobacco group in 1997.
If found guilty, the prosecutor is also demanding that Mr Alierta be banned from holding directorships in public companies for four years.
Mr Alierta, a wealthy former stockbroker, stepped down from Tabacalera to become chairman of Telefónica in 2000.
Mr Alierta denies committing any impropriety when he was chairman of Tabacalera, which is now known as Altadis following its merger with Seita of France.
He has said he will not step down as chairman of Telefónica during the trial. Mr Alierta told the Financial Times in an interview when the allegations first surfaced three years ago that he would appeal all the way up to the constitutional court, the final court of appeal in Spain, if found guilty by the Madrid high court.
Telefónica on Tuesday declined to comment on the charges against Mr Alierta.
Alejandro Luzón, the anti-corruption prosecutor who has led the investigation, is also seeking a four-year jail term for Luis Javier Placer, Mr Alierta's nephew, on charges of insider trading. Accusations against Cristina Placer, Mr Alierta's wife, have been dropped.
The prosecution's case, presented to an investigating judge on Monday, argues that Mr Alierta used his nephew as a front-man to acquire some Pta388m (€2.3m) of Tabacalera stock in the run-up to two market-moving announcements: the acquisition of a cigar company in the US and a rise in tobacco prices.
The prosecution charges that Mr Alierta instructed his nephew to buy Tabacalera's stock in the knowledge that its price would rise, as indeed it did, by 113 per cent, between the dates of the first and last trades. This compared with a 36 per cent rise in the general index of the Madrid stock exchange during the same period.
A previous attempt to bring Mr Alierta to trial was blocked in 2002 by Jesús Cardenal, Spain's former attorney-general, who said there was insufficient evidence. Mr Alierta, like Mr Cardenal, was a political appointee of José Mar”a Aznar's conservative government. But the election of a socialist government in 2004, and the naming of a new attorney-general and investigating judge, appears to have cleared the political obstacles that stood in the way of Mr Alierta's trial.