THREE company executives duped shareholders by booking non-existent deals as sales, Southwark Crown Court was told yesterday on the opening day of a landmark prosecution brought by the Financial Services Authority.

Carl Rigby, Gareth Bailey and Alistair Rowley, all former senior executives of the quoted software group AIT, allegedly used the bogus deals to claim that they would meet sales and profit expectations.

The company claimed in a statement in May 2002 that it would meet profit expectations of £6.7 million. A month later, however, it issued the first of two profit warnings, which together sent the shares plunging from 492½p to 38½p. The warnings wiped £90 million from the company, which was previously worth £100 million.

Mr Rigby, 43, former chairman and chief executive, Mr Bailey, 36, former chief financial officer, and Mr Rowley, 43, former sales director, all pleaded not guilty to two counts of making false, misleading or deceptive statements.

The case is the first criminal prosecution of alleged market abuse brought by the FSA, the main City regulator, which until now has confined itself to fines through its internal regime. The maximum criminal sentence is seven years’ jail.

William Boyce, QC, for the prosecution, said: “People lost money. This was not a victimless crime.”

Shareholders in AIT and prospective investors were harmed because they were unable to make informed decisions, he said. People investing indirectly through endowment mortgages and pensions were also affected because the integrity of the market was damaged.

The three defendants made it appear that the company had clinched binding contracts in the financial year to March 31, 2002 with three customers — Centraal Beheer, Datapoint UK and St James’s Place — when it had not, the court was told.

AIT’s board was “kept in the dark”, as were AIT’s outside advisers, which included UBS, the investment bank, Arthur Andersen, the now-defunct accounting firm, Freshfields, the law firm, Financial Dynamics, the PR consultancy, and Royal Bank of Scotland.

Mr Boyce said that companies had to apply accounting consistently, adding: “You can’t just change willy-nilly to make things look pretty.” He said Andersen had explained to Mr Bailey the previous year how revenues should be treated under US GAAP, the accounting code. One GAAP clause states that customer agreements, including side letters, had to be taken into account. “Side letters are at the heart of the deceit in this case,” he said.

The case continues.