ZURICH, Sept 24 (Reuters) - Investor Martin Ebner, a fallen star in the Swiss financial firmament, professed innocence as his trial on insider trading charges began on Wednesday.
Zurich prosecutors are seeking a seven-month suspended sentence and a fine for Ebner, whose shareholder activism once made him the scourge of the Swiss business establishment but whose financial empire crumbled in the global stock market rout.
Legal experts say one of the main issues to be decided is whether a major shareholder qualifies as an insider at all. Unlike in the surrounding European Union, big shareholders are not listed as insiders under Swiss law.
The case revolves around the 1998 sale of shares that Ebner's BZ Group held in Italian tyre and cable group Pirelli's Swiss holding company SIP.
Prosecutor Marc Jean-Richard-dit-Bressel told a three-judge district court panel that Ebner began to sell after it became clear from his meetings with Pirelli managers that a buyout of SIP to simplify Pirelli's complex holding structure was coming but at a price below the market price.
Three days of brisk selling in March 1998 -- nearly two weeks before the buyout was announced -- pushed the SIP price down close to the actual 350 Swiss franc offer price.
"The wave of selling from BZ Bank from March 10 to 12, 1998, had nothing to do with market-making, not even in the broadest sense," he said, rejecting Ebner's explanation for the deals. "The accused wanted to achieve financial gain with these sales."
Ebner, 58, insisted this was not the case and that he was unaware that Pirelli would set the offer at 350 francs a share.
Instead, he told the court, he authorised the sales to help take the steam out of a rally in SIP and underlying Pirelli stock on unfounded rumours that BZ would make a full takeover offer for the Italian industrial group.
Only by pushing the price toward 350 -- a level he thought valued SIP fairly -- could he ensure that efforts to simplify Pirelli's byzantine structure and thus unlock value for investors did not fall apart, he said.
"This was my only motivation," Ebner, wearing his trademark bow tie, told the court while standing in the dock.
In fact, Ebner made a loss on BZ's string of trades in SIP shares in the runup to the buyout announcement.
Prosecutors say that as a big shareholder Ebner counts as an insider because BZ was advising Pirelli on its overhaul and thus had access to confidential information.
The verdict is set for Thursday.