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Eurotunnel Probe Continues

May 17, 2000

LONDON (AP) _ Eurotunnel on Wednesday rejected accusations that its executives acted dishonestly or published false information, as shareholders assailed the company’s directors for its poor performance and dismal share price.

The Anglo-French company, which operates the rail tunnel beneath the English Channel, insists it’s on the track to recovery and expects to break even by 2002.

Authorities in France are currently investigating allegations made by French investors who suffered heavy losses on their shares in the company. The probe focuses on six current or former top executives and four bankers and members of financial institutions.

The Eurotunnel board said it ``totally rejects″ the allegations against these executives, calling them ``multiple errors of fact.″

Still, the judicial inquiry is just the latest blow to Eurotunnel since it began digging the ``Chunnel″ in 1987.

Cost overruns and delays plagued work on the tunnel, and last year’s ban on sales of duty-free goods inside the European Union bit deep into revenues. The company is laboring to staunch its losses, and its share price has hit bottom.

Eurotunnel shares debuted in 1987 at 3.50 pounds each and soared to more than 12 pounds in mid-1989. But they plunged as the company’s financial problems mounted. Shares finished trading Wednesday at 67 pence ($1.01), down 0.4 percent.

Several people at Eurotunnel’s annual shareholder meeting blamed the board for failing to revive the share price.

``You keep talking about the good work you do. ... All I see is you keep improving your remuneration,″ said Serge Caron, a shareholder from Dunkirk, France. Caron wore a white T-shirt with the French words for ``Despoiled by Eurotunnel″ emblazoned on its front.

Chairman Patrick Ponsolle said he shared shareholders’ disappointment. He and other members of the board tried, unsuccessfully, to deflect such criticism by pointing to recent improvements in the company’s finances.

Directors noted that operating profit for 1999 was higher than the year before, in spite of the ban on duty-free sales. Passenger and freight traffic also increased during the first quarter of 2000, they said.

``We are, God willing, in sight of a complete turnaround,″ deputy chairman Charles Mackay said.

However, Ponsolle acknowledged that the judicial inquiry threatens to undermine the incipient recovery.

``The problems prevailing now will certainly impede improvements,″ he said.

The inquiry follows complaints in 1994 and 1997 from two groups representing Eurotunnel’s small shareholders.

The earlier complaint accuses bankers of using insider information to profit from share dealings at the expense of small investors.

The later complaint alleges that Eurotunnel executives themselves misinformed shareholders by publishing overly optimistic forecasts about the company’s prospects.

Board members acknowledged that the forecasts proved to be unrealistic but denied they had misled investors.

``I don’t feel guilty,″ Ponsolle said. ``I made a mistake in perfectly good faith.″

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