Spanish stock market regulators cleared former Telefonica Chairman Juan Villalonga of wrongdoing Wednesday in an insider trading investigation that helped force his resignation last week.
The National Securities Market Commission said there was insufficient evidence to prove that Villalonga--chief architect of the telecom company's global expansion--used privileged information in a 1998 stock options trade.
The flamboyant former investment banker stepped down a week ago, citing heavy pressure from the Spanish government. Telefonica's board immediately replaced him with Cesar Alierta, chairman of the French-Spanish tobacco group Altadis.
Villalonga, 47, had repeatedly denied any basis for the insider trading allegations, complaining that he was the target of a smear campaign.
But the probe served as the final catalyst for his departure from the company he transformed from a plodding state monopoly into an aggressive multinational corporation.
Leading shareholders, unhappy with his failure to consult them on major deals, had been pushing for resignation for months.
Analysts had said a speedy resolution of the insider trading probe was needed to free Alierta from distractions and allow him to concentrate on closing major deals engineered by his predecessor.
Those include the $12.5-billion merger of Telefonica's Internet arm Terra Networks with U.S. search engine Lycos Inc.
Villalonga bought options on Telefonica shares in January 1998 while the company was negotiating a strategic alliance with U.S. carriers WorldCom Inc. and MCI.
After consulting with the commission, he sold the options less than two weeks later and pocketed a profit of about $120,000.
An earlier commission investigation found no irregularities, but the probe was reopened last month after the pro-government newspaper El Mundo accused him of insider trading.
Legal experts said Villalonga's transaction was legal under securities laws in effect in 1998, but the government has since tightened trading rules imposed on corporate executives.