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06 Jan 2004 17:39
The Parmalat scandal deepened on Tuesday with Dutch regulators probing three subsidiaries and an investigator suggesting that the size of the bankrupt food group’s financial black hole was “without limit”.
The scandal, already replete with strange names such as Buconero for a financial vehicle meaning “black hole” in English, and offshore accounts Bonlat and Epicurum, now involves litigation in the United States and Italy.
International banks and accounting groups are also reportedly under pressure to provide information.
And meanwhile one of the key figures, former finance director Fausto Tonna, was taken before investigators for a second day of intensive interrogation over the kernel of the vast alleged fraud said to have left a hole of about €10-billion in the bankrupt group’s accounts.
In total Tonna, Parmalat founder Calisto Tanzi and six others are detained for questioning without formal charges being laid.
But as investigators pursued many lines of enquiry to find out what happened and how much was involved, one of them suggested that the total shortfall was so far “without limit”.
He was quoted as saying in the newspaper La Repubblica that “wherever we go at Parmalat, at [the group’s football club] Parma Calcio, at [Tanzi’s tourism business] Parmatour, we find false documents and debt and people tell us of other false documents and debt, the [financial] hole is without limit” as all of the group’s companies diverted funds.
The collapse last month of Italy’s largest food group and its web of companies has had far-flung consequences, from unpaid French dairy farmers seeking creditor protection to pressure for information from top-tier banks such as Citigroup, Bank of America and Deutsche Bank.
Dutch financial watchdog AFM said on Tuesday it is investigating Parmalat activities registered in The Netherlands.
Parmalat has three Dutch units registered in Rotterdam, one of which, Parmalat Finance Corporation, was a major bond issuer for the company.
The AFM spokesperson said the regulator is working with Italian authorities and the US securities and exchange commission on the investigation.
According to a Wall Street Journal report, the Dutch units issued bonds to raise €7-billion.
Bonds appear to be a key factor in the group’s problems, and the Italian daily MF reported that the Bank of Italy had asked Italian banks to book loans to Parmalat as bad debt unlikely to be recovered.
The special administrator with six months to plan a rescue, Enrico Bondi, was also reported to be pressing creditor banks for an immediate credit line of more than €100-million euros, and efforts were being made to ensure finance to keep the Parma football team, a leading European club, in the game.
Meanwhile, Italian investigators resumed interrogation of Tonna who had been grilled for 12 hours on Monday on his reported acknowledgement of fraud on orders from Tanzi.
On Monday, Parmalat investors in Italy and the US filed lawsuits against the collapsed company.
A lawsuit filed in New York on behalf of US shareholders seeks at least $1-billion for investors victimised by “one of the largest financial frauds ever perpetuated”.
The suit names Tanzi, Tonna and financial, auditing and legal firms accused of engineering a fraud scheme for more than a decade that allegedly diverted $1-billion to themselves while investors bought $5-billion of overvalued Parmalat securities.
It also names US finance giant Citigroup, auditors Deloitte Touche Tohmatsu and Grant Thornton International and its Italian affiliates as well as the law firm of Zini and Associates, alleged to have helped facilitate the fraud.
Citigroup is accused of participating in the scheme by working with Tonna and Tanzi to create a financial vehicle named Buconero LLC or the “black hole” in Italian, to allow cash outflows to be listed on Parmalat’s balance sheet as equity instead of debt.
A fictitious $4,9-billion bank account was set up through Bonlat Financing Corporation, a wholly owned Parmalat subsidiary based in the Cayman Islands, to carry out the scheme, according to the suit.
An Italian association of retail investors—Assorisparmiatori—filed a complaint with Milan public prosecutors against Parmalat Finanziaria.
Parmalat, which operates in 30 countries and employs about 36 000 people, was declared bankrupt on December 27.
The swift collapse of the group was partially triggered by its failure to withdraw about €500-million from the Epicurum leisure fund in the Cayman Islands to repay a bond issue.—Sapa-AFP
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