Noël Forgeard, the former joint chief executive of EADS, was placed under formal investigation today on suspicion of playing a key role in one of the biggest insider trading scandals to hit European industry.

The move came at the end of 36 hours of police custody for the man largely responsible for building Airbus, EADS' aircraft manufacturing business, into a global power.

If found guilty, he faces a maximum sentence of two years in prison and a fine equivalent to 10 times the profits he made from the alleged insider trades.

Mr Forgeard, who denies the allegations, was "overwhelmed" at his detention in a sparse police cell in Paris, according to Maitre Jean-Alain Michel, his lawyer.

"When you are someone like Mr Forgeard, who has had an exceptional industrial career, it's very difficult to find yourself in detention. But he has courage and he survived the shock. He has good morale."

"I am convinced we will succeed in demonstrating that he didn't commit insider trading. We have very good evidence to prove that."

Mr Michel said Xaviere Simeoni et Cecile Pendaries, the judges in charge of the inquiry, had formally placed Mr Forgeard under investigation for insider trading after he was questioned by the Paris police financial brigade.

He was freed on bail after paying €1 million.

The judges rejected a call by prosecutors for a second charge of misleading the financial markets to be made against the former chief executive, according to Mr Michel.

The former chief executive of EADS is accused of exploiting privileged information to sell 360,000 of the group's shares in November 2005 and March 2006 for €4,342,480 (£3.41 million).

Prosecutors say he knew their value would plummet when problems in producing Airbus' flagship A380 aircraft were made public.

Official documents show that he exercised an option to buy the shares at between €15 and €17 and sold them at €32.01.

In June 2006, A380 delivery delays were revealed, wiping €5.5 billion off EADS shares.

Mr Forgeard was forced to resign in July 2006 and received an €8.5 million golden parachute.

A report by the French Financial Markets Authority (AMF) pointed to “massive” insider dealing by 17 current and former executives of EADS and Airbus, who sold a total of 1,708,600 shares for almost €20 million.

These include Mr Enders, who made €711,750, John Leahy, Airbus’s chief salesman, who made €3,128,075, Fabrice Brégier, Airbus’s chief operating officer, who made €717,300, and Francis Auque, head of EADS’s space division, who made €365,000.

According to the AMF, they were in possession of privileged information about A380 production problems and should have abstained from exercising stock options.

All may be questioned by the Paris police’s financial brigade. Like Mr Forgeard, they deny any wrongdoing and claim that they were unaware of the A380 production difficulties when they sold EADS stock.

The AMF report also denounced EADS’s two core shareholders, Lagardère, the French media group, and Daimler, the German carmaker, over the sale of stock for almost €2 billion each in April 2006. The two companies also deny insider-trading claims.

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