Via CNN.com:

Parmalat founder fraud trial opens

September 29, 2005
CNN.com
Alessio Vinci, Contributor

MILAN, Italy (CNN) -- The founder and former boss of Parmalat has appeared in a Milan court in the first major trial over the Italian dairy giant's collapse almost two years ago in one of Europe's biggest corporate fraud scandals. Calisto Tanzi and 15 others face charges of market rigging, false auditing and misleading Italy's stock market regulator and investors.

Dozens of those investors gathered outside the Milan courthouse hearing the trial as the proceedings opened. Tanzi arrived one hour late and assumed a seat in the front row. One of his lawyers said he had been caught in traffic. After about an hour in court, Tanzi left.

The trial was adjourned to December 2 to allow the court time to consider a request from investors to join a civil suit linked to the criminal case. Also on trial are three bank executives and two auditors from the Italian branch of Deloitte & Touche and the former Italian branch of Grant Thornton.

One of the defendants, Giovanni Bonici -- former chairman of Parmalat Venezuela and the Cayman Islands-based subsidiary at the center of the bankruptcy -- was one of the few of the other accused to appear in the court. "I am as much of a victim as the investors," he was quoted as saying by the ANSA news agency.

The defendants face up to 10 years in prison if found guilty. Defense lawyers said on Tuesday that Tanzi would cooperate during the trial. "He knows what his responsibilities are," Giampiero Biancolella, one of Tanzi's attorneys, told the Associated Press. "What we want is to help reconstruct faithfully what happened at Parmalat so the judge can make a decision based on that reconstruction."

The Parmalat scandal, dubbed "Europe's Enron", erupted in December 2003 when the company admitted that an account worth nearly &euro4 billion ($4.8 billion) it claimed it held in a Bank of America account in the Cayman Islands did not exist. Months of investigation followed, uncovering a tangle of offshore companies and accounts.

Prosecutors said Parmalat's old management created them to paper over a gaping debt of nearly 14 billion euros ($16.9 billion). Authorities declared the company bankrupt and overnight, tens of thousands of stocks and bonds holders were left holding worthless paper. Italian Prime Minister Silvio Berlusconi called an emergency cabinet meeting in the wake of the collapse, but measures agreed then have still not been passed into law.
Blame

As the trial began, Tanzi's lawyers submitted a list of witnesses to Judge Luisa Ponti which included the heads of such banks as Capitalia and Mediobanca, as well as market regulators Consob and the Bank of Italy. Reports had claimed Tanzi would try to shift blame for the scandal on to the banks, but Biancolella denied that. "We cannot transform ourselves from the accused into accusers," he said.

The banks have denied any wrongdoing. Earlier this year Tanzi asked for forgiveness from those who suffered as a result of the scandal. But Paolo Vivian, a pensioner who lost 25,000 euros, was not impressed. "It is ridiculous, he should have thought about it before the fraud," he said. "He could have spared us his apology because no-one has accepted it." As compensation, Vivian received shares in the new Parmalat worth around 10 percent of his original investment.

In June, 11 others including three of Parmalat's former chief financial officers, accepted plea bargains that saw them sentenced to two-and-a-half years in prison for their parts in the fraud. A fast track trial of two accountants from Grant Thornton began in January.

A government-appointed administrator, Enrico Bondi, now runs Parmalat. He has launched a series of lawsuits against banks aimed at recouping some of the investors' money lost in the crash. He also instigated a tough restructuring of the company that has seen it shake off the scandal and remain a prime player in the Italian dairy market.

Gabriel Kahn, Rome correspondent of the Wall Street Journal, told CNN: "Parmalat has come back stronger than many people might have expected. "The real hit was when the scandal broke two years ago so I'm not sure putting Tanzi on trial now will hurt the brand. It may even help by putting it back in the news."

Shares in Parmalat were suspended shortly after the collapse, but are due to be relisted next month. Anaylsts said they would be indicated to open between 2.38 euros and 2.45 euros.

The original article appears here. For more info on prior Parmalat-related litigation check out The Daily Caveat's previous posts here and here. And for additional details on that anti-fraud legislation that Italians are still waiting to see signed into law, check out this post and the article linked therein.

-- MDT

Labels: Enron, Grant Thornton, Parmalat