Parmalat chaos still spreads

The group atop Parmalat’s collapsed dairy empire went bankrupt on Thursday as investigators pursued revelations that are shaking the Italian establishment.

Parmalat meanwhile severed all links with international accountants Grant Thornton, for years the auditors of various group divisions in a tentacular scandal that is also dragging international banks under scrutiny.

A Parma bankruptcy court declared Parmalat Finanziaria and its units Eurolat and Lactis insolvent, court sources said.

The parent company owns the Parmalat dairy operations and foreign accounts at the heart of a scandal one lawyer said was in the same league as the “clean hands” probe of Italian political corruption in the early 1990s.

However, the Parmalat affair concerns companies and jobs in 30 countries on six continents, with investigators from Brazil and New York to The Netherlands and Milan searching for about â,¬10-billion euros in missing funds.

In Italy the affair is a major shock. Parmalat is the eighth-biggest industrial company, a household name in dairy products, and its bonds were a popular investment for small savers.

The company owns the Parma football club, a leading European team.

Parmalat, still announcing its slogan on its website on Thursday—“Life is joy, life is emotion”, has been a mainstay of this northern city.

“It is a bottomless pit. There is no end in sight,” an investigator said on Wednesday after a source revealed that Parmatour, a tour operator held by the Tanzi family that founded Parmalat, had a hole in its accounts of more than two billion euros.

The Parma court declared Parmalat’s food and dairy division, which heralds itself as “the most innovative company in the market”, insolvent on December 27.

In Milan, lawyer Marco Deluca on Wednesday compared the affair with the 1992 “clean hands” scandal that ultimately brought down the Christian Democrats and also rocked the Socialist party.

“Unfortunately few things have changed in the country,” said Deluca, part of a team brought in to save 36 000 Parmalat jobs in

30 countries.

“It’s only the kind of crimes that have changed.
We used to speak of corruption, now its financial collapse. The investigations are very complex and technical since they require accounting verifications.”

Political effects began to emerge on Thursday with a demand that Economy and Finance Minister Giulio Tremonti testify in a parliamentary investigation due to begin in coming days.

“Given the grave, complex and developing events, it is fair that the economy minister give us a maximum of information,” said Giorgio la Malfa, president of the deputies’ finance commission.

The European Union’s executive commission is also mulling moves to tighten legislative controls over corporate accounting practices following allegations of massive fraud at Parmalat, an EU spokesperson said on Wednesday.

Italian investigators had interrogated detained executives intensively since last weekend.

But in Milan, Judge Guido Piffer rejected on Thursday a request that Calisto Tanzi, Parmalat’s 65-year-old founder and former chairperson, be granted bail on health grounds.

The head of Grant Thornton’s Italian office, Lorenzo Penca, is another of eight people jailed in connection with the case, although no formal charges have been brought against any of them.

Grant Thornton had certified Parmalat’s accounts until 1999 and continued to be responsible for auditing several subsidiaries after handing over the group’s books to Deloitte and Touche.

Among the accounts retained by Grant Thornton was the Bonlat Financial Corporation subsidiary in the Cayman Islands.

It was there that a growing scandal erupted when Bank of America disowned the authenticity of a document certifying that Bonlat had â,¬3,95-billion of liquidity at December 31 2002.

Former Parmalat financial director Fausto Tonna is reported to have “finally shed light on what the practices were” at the group, and to have spoken of Parmalat’s relations with Italian and South American banks and with South American economic and political circles.

German finance regulator BaFin is examining Deutsche Bank’s dealings with Parmalat shares and bonds following the collapse and Dutch financial regulators are looking into three subsidiaries.

A Deutsche Bank director is reported to face questioning in Milan over the bank’s sale of Parmalat stock as well.

Citigroup, another top international bank that dealt with the group, would cooperate with Parmalat Finanziaria’s administrator Enrico Bondi in providing funds to keep its industrial activities going, financial sources said.—Sapa-AFP

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