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Telefonica's Chairman Due in Court on Insider Trading Allegations

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Telefonica's Chairman, Cesar Alierta is expected to appear in court today as trial commences concerning a job he held at a tobacco company ten years ago. The Spanish prosecutor is alleging that he knew of an impending takeover of the tobacco firm, Tabacalera by US based Havatampa and profited by USD2.5 million from share purchases just prior to the announcement.

The prosecutor says that Tabacalera's share price doubled in price between the date of the first share purchase and when the shares were sold, compared to a 37% rise in the overall stock market over the same timeframe.

Alierta became Telefonica's Chairman in 2000, and Telefonica has declined to comment on the matter.

Anticorruption prosecutors are seeking four-and-a-half years' in prison for Cesar Alierta and four years for his nephew Luis Javier Placer, who is also alleged to have been involved.

An investigation into the share purchases in 1998 by the stock exchange found that there was no evidence of malpractice, and this was supported by a separate investigation in 2002. A later lawsuit launched by a consumer association also failed to prove that insider trading had occurred.

A criminal trial against Alierta in 2005 was dismissed as the date was past the statute of limitations, but a Madrid court has overruled that decision and reopened the case.

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