See Yahoo for the details...

-- MDT

Labels: class action, Parmalat, settlement

"Looted" is actually the word former Parmalat CEO Enrico Bondi used in documents obtained by the Financial Mail. For more on the recent troubles of of both Parmalat and Grant Thornton, check out the tags below.

And thanks to Ben Dinolt of Dinolt, Becnel and Wells for the tip on the article. While you're at it check out the firm's swank new website.

-- MDT

Labels: Grant Thornton, Parmalat

Deloitte & Touche SpA and Dianthus Spa, representing an Italian branch of the international accounting firm, Deloitte & Touche have agreed to pay Parmalat $149 million as compensation for D&T's role in the dairy giant's $8 billion accounting fraud. The firms served as auditors for Parmalat prior to the company's collapse.

This is only one of many such settlements with financial institutions that Parmalat has pursued as the company has attempted to crawl out from under scandal and $18 billion in debt on which it had defaulted. Parmalat has a similar suits still pending against several financial institutions including, notably, Grant Thornton and Bankf of America.

-- MDT

Labels: Deloitte, Dianthus, Grant Thornton, Parmalat

Because of the Opus Dei connection Italian newspapers have already dubbed the murder investigation The Rovera Code. Via News.com.au:

"A banker who had been questioned over a huge corporate scandal was found murdered on Friday, having apparently been kidnapped coming home from a meeting of the Roman Catholic organisation Opus Dei. The body of Gianmario Roveraro, 70, had been chopped into pieces and hidden in a hut beneath a motorway bridge about 30km from Parma. Police said three men had been charged over the crime but a limited confession by the alleged ringleader opened the way for a flood of speculation...

...Luciano Garofano, the chief of the police squad that found the body, said: "We are dealing here with a particularly savage murder." The alleged ringleader of those arrested was Filippo Botteri, 43, described as a former financial consultant from Parma who allegedly had had dealings with Mr Rovera..."

More here.

-- MDT

Labels: Parmalat

Via The Independent:

Grant Thornton facing huge claims over Refco collapse

By Katherine Griffiths in New York
October 19, 2005
The Independent

Grant Thornton, the international accountancy firm which audited the scandal-ridden futures trader Refco, defended its reputation yesterday in the face of possible multimillion-dollar claims from investors hit by the dramatic collapse of the firm.

Edward Nusbaum, the chief executive of Grant Thornton, admitted that the company would be sued for its involvement in signing off Refco's accounts when it floated on the New York Stock Exchange in August. But he insisted the firm had been misled, just as Refco shareholders had been, by the company's former management.

Refco filed for bankruptcy for two parts of its business yesterday and tentatively agreed to a fire sale of a third part, which trades financial futures, to a consortium led by the private investment group JC Flowers for $768m (£439m). JC Flowers, which is run by Christopher Flowers, a former Goldman Sachs banker, must get the deal approved by a Manhattan bankruptcy court.

The move marks an extraordinarily swift demise for Refco, which revealed last Monday that its chief executive and chairman, Phillip Bennett, was departing after the brokerage found he had covered up millions of dollars of bad debts. Mr Bennett was arrested the following day on criminal charges that he misled investors about the true state of Refco's finances at the time of its flotation.

Grant Thornton took over as Refco's auditor from the defunct accounting giant Arthur Andersen. The firm, as well as Refco's banking underwriters Goldman Sachs, Credit Suisse First Boston and Banc of America Securities, are likely to be the focus of lawsuits brought by shareholders whose investments may be entirely wiped out by the revelations of alleged fraud.

Mr Nusbaum said: "If we had known about the situation before, we would have conducted an investigation and made the implications [known] as it related to the financial statements. Everything we have seen so far indicates we complied with professional standards. Certainly we will be sued. There will be significant legal costs. We believe the cost will be absorbed by the firm."

Lawsuits are being prepared against various parties involved with Refco by heavyweight law firms such as Milberg Weiss and Lerach Coughlin.

In its defence, Grant Thornton will be able to say that it reported two serious deficiencies in Refco's internal financial controls, which were included in the company's IPO prospectus. The auditor noted at the time that there was a shortage of people to prepare Refco's financial statements and a lack of formalised procedures for closing the company's books.

Refco is the latest corporate scandal to engulf Grant Thornton. The Chicago-based firm was also the auditor of Parmalat, which collapsed after an accounting fraud. In the Refco case, the role of Goldman is also being scrutinised because of the number of relationships it has to parties involved in the rapidly evolving situation. As well as being an underwriter in the float, Goldman was hired last week to offer crisis management advice to Refco. Mr Flowers, who emerged as a buyer for Refco's futures arm over the weekend, was a partner at the bank. He has hired Matt Winkelman, formerly joint head of Goldman Sachs fixed-income division, as the new chairman of the futures business.

Mr Flowers said: "I left Goldman Sachs a long time ago and no longer have any association with it." He added that his consortium has an option to buy the rest of Refco. A possible deal will depend on how the Manhattan bankruptcy court divides the company's assets among creditors and investors.

Grant Thornton, the international accountancy firm which audited the scandal-ridden futures trader Refco, defended its reputation yesterday in the face of possible multimillion-dollar claims from investors hit by the dramatic collapse of the firm.

Edward Nusbaum, the chief executive of Grant Thornton, admitted that the company would be sued for its involvement in signing off Refco's accounts when it floated on the New York Stock Exchange in August. But he insisted the firm had been misled, just as Refco shareholders had been, by the company's former management.

Refco filed for bankruptcy for two parts of its business yesterday and tentatively agreed to a fire sale of a third part, which trades financial futures, to a consortium led by the private investment group JC Flowers for $768m (£439m). JC Flowers, which is run by Christopher Flowers, a former Goldman Sachs banker, must get the deal approved by a Manhattan bankruptcy court.

The move marks an extraordinarily swift demise for Refco, which revealed last Monday that its chief executive and chairman, Phillip Bennett, was departing after the brokerage found he had covered up millions of dollars of bad debts. Mr Bennett was arrested the following day on criminal charges that he misled investors about the true state of Refco's finances at the time of its flotation.

Grant Thornton took over as Refco's auditor from the defunct accounting giant Arthur Andersen. The firm, as well as Refco's banking underwriters Goldman Sachs, Credit Suisse First Boston and Banc of America Securities, are likely to be the focus of lawsuits brought by shareholders whose investments may be entirely wiped out by the revelations of alleged fraud.

Mr Nusbaum said: "If we had known about the situation before, we would have conducted an investigation and made the implications [known] as it related to the financial statements. Everything we have seen so far indicates we complied with professional standards. Certainly we will be sued. There will be significant legal costs. We believe the cost will be absorbed by the firm."

Lawsuits are being prepared against various parties involved with Refco by heavyweight law firms such as Milberg Weiss and Lerach Coughlin.

In its defence, Grant Thornton will be able to say that it reported two serious deficiencies in Refco's internal financial controls, which were included in the company's IPO prospectus. The auditor noted at the time that there was a shortage of people to prepare Refco's financial statements and a lack of formalised procedures for closing the company's books.

Refco is the latest corporate scandal to engulf Grant Thornton. The Chicago-based firm was also the auditor of Parmalat, which collapsed after an accounting fraud. In the Refco case, the role of Goldman is also being scrutinised because of the number of relationships it has to parties involved in the rapidly evolving situation. As well as being an underwriter in the float, Goldman was hired last week to offer crisis management advice to Refco. Mr Flowers, who emerged as a buyer for Refco's futures arm over the weekend, was a partner at the bank. He has hired Matt Winkelman, formerly joint head of Goldman Sachs fixed-income division, as the new chairman of the futures business.

Mr Flowers said: "I left Goldman Sachs a long time ago and no longer have any association with it." He added that his consortium has an option to buy the rest of Refco. A possible deal will depend on how the Manhattan bankruptcy court divides the company's assets among creditors and investors.

The original article appears here.

-- MDT

Labels: Grant Thornton, Parmalat, Phillip Bennett, Refco

Chicago accounting firm Grant Thornton is being targeted by a class action lawsuit on the grounds that, in it's role Refco's auditor and IPO underwriter, Grant Thornton failed to detect the massive financial fraud that had been perpetrated by Refco CEO Phillip Bennett and co-horts to be determined.

As this article from ChicagoBusiness.com points out, Grant Thornton was previously involved in the accounting scandal surrounding the Parmalat corporate fraud but emerged largely unbloodied from the ensuing investigations.

-- MDT

Labels: Grant Thornton, Parmalat, Phillip Bennett, Refco

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

Former Kroll investigator, William Brittain-Catlin's new book, Offshore: The Dark Side of the Global Economy, attempts to lay bare the wild-cat ways of offshore "boomtowns", such as Bermuda, the Caymans or the British Virgin Islands. And it's is not just shady cartels that operate via these unregluated locations. Major corporations also save a bundle by doing so, skirting regulations meant to reign in the very abuses that offshore banking facillitates.

While Catlin's book illustrates the links between these shady financial centers and some of the biggest recent corporate frauds his focus is ultimately conceptual rather than pragmatic. His target seems to be capitalism itself, using the offshore economy as evidence of its most rampant abuses, as this Detroit Free Press review illustrates:

Chilling expose` dives into murky waters

August 14, 2005
REVIEW BY JAMES PRESSLEY

William Brittain-Catlin, a former investigator for Kroll Associates Inc., nurses a dark vision of capitalism.

'Offshore' - THREE STARS out of four

By William Brittain-Catlin

Capital, as he describes it, is a protean beast, a "wild animal let out of a cage." The nation state has become "a servant of stateless capital," its citizens suppressed by the "controls of bourgeois capitalist society, in particular the work ethic."

Never mind his hyperventilating style. "Offshore: The Dark Side of the Global Economy" is a convincing description of a perverse world in which capitalism is a giant shell game, where mainstream multinationals shunt assets and liabilities around the globe to evade taxes, hide debt and buy political favor. The fall guys for this scam are shareholders, taxpayers and society at large.

"Offshore" has many strengths, offering a solid primer on how capital slithers in and out of brass-plate subsidiaries as companies ranging from GE and Wal-Mart seek to lower their taxes. The author chooses to bring offshore finance into focus through the lens of the Cayman Islands. The sun-soaked British dependency proves an effective setting for this dark drama, as Brittain-Catlin combines snippets of the Caymans' seagoing past (Columbus, turtles and Blackbeard the Pirate) with its role in the collapses of companies such as Enron Corp.

In lean prose, the author captures the convoluted story of U.S. energy trader Enron in 20 pages and boils the fraud at Italian food company Parmalat down to nine. The summations create crisp snapshots on how multinationals funnel profits offshore even as they milk governments onshore.

Enron, for example, used hundreds of Cayman subsidiaries to slash its U.S. taxes and hide losses. The Houston-based company also used its clout, including a friendly connection to President George W. Bush, to keep the government from regulating energy-derivatives trading, he says.

Enron combined offshore freedom with the kind of onshore protection that prompted government bailouts of Chrysler Corp. and the entire U.S. savings and loan sector. "The modus operandi for the corporation is to pass the cost of its losses onshore onto society and its taxpayers, while the corporation runs off with the profit and parks it offshore," Brittain-Catlin writes.

The same dichotomy lies at the heart of the success of Lakshmi Mittal, the author says. The Indian magnate created the world's biggest steel company -- with mills from Cleveland to Kazakhstan -- through offshore holding companies in tax havens such as the Netherlands Antilles. Yet he built Mittal Steel Co. with the help of politicians like U.K. Prime Minister Tony Blair and soft loans from the European Bank for Reconstruction and Development.

"Offshore" blames this mess on Western philosophy. Brittain-Catlin traces the roots to Immanuel Kant, who argued that the individual had absolute moral autonomy -- a vital bulwark against the utilitarianism of the age. Along the way, though, this freedom was subverted in the struggle against absolutism, the author argues. Political freedom suppressed individual rights, forcing us to conform with bourgeois mores. "What was billed as freedom in fact turns out to be a pretext for coercion," he says.

It doesn't take too much imagination to draw a line from the age-old urge for autonomy to a modern German's desire to protect himself from punitive taxation by dragging a suitcase full of cash to a bank in Luxembourg. Unfortunately, Brittain-Catlin muddies the argument with a sometimes-tortuous line of reasoning that leads from Greek mythology to the hypocrisy of the European bourgeoisie. Equally irritating is the author's failure to offer any solution. He challenges neocons and reformists alike, yet offers no answers of his own.

One thing is clear: Brittain-Catlin rejects the argument that there is a legitimate use for offshore finance. "A distinction cannot be made," he says, "between the use and abuse of offshore tax havens any more than it can be made between the light and dark side of the international financial system." That distinction, made routinely by bankers and accountants, has worn thin in our age of terrorism, money laundering and corporate fraud. Bankers may bristle at Brittain-Catlin's rhetoric; they cannot ignore his message.

The original review appears here. If you would like to hear the author speak about his book in his own words NPR has an interview with Catlin.

And if you are interested in regular updates from this sector, The Daily Caveat recommends Know Your Customer News, which offers daily updates, email newsletters and searchable databases relating to offshore incidents and intrigue.

-- MDT

Labels: Enron, Kroll, money laundering, Parmalat

The ever reliable Economist has an interesting article juxtaposing the, shall we say, divergent reactions of regulators in Italy and the United States following the discovery of monumental corporate frauds in each country. A brief snippit:

Another year, another scandal

Aug 4th 2005
The Economist Global Agenda

The latest scandals over a contested bank bid show that Italy has learned little from the spectacular collapse of dairy group Parmalat. The country’s reputation as a sensible place in which to invest has been badly damaged. But don't expect the government to do much about it.

Less than two years ago, the spectacular bankruptcy of Parmalat, a family-controlled Italian dairy group, sent shock waves throughout Italy. It was the biggest scandal in European corporate history, revealing a €14 billion ($17 billion) accounting hole that had grown over a decade of deception. The saga cast regulators, bankers and auditors in a desperately unfavourable light for not spotting the fraud much more quickly than they did.

Europe’s Enron offered a chance for the comprehensive reform of Italy’s financial regulation that it so badly needs. Yet the growing scandal over the contested bids for Banca Antonveneta by Banca Popolare Italiana (BPI) and ABN Amro, a Dutch bank, shows that this opportunity was instead comprehensively missed...

Much more taking to task of Berlusconi's Italy in the full article.

-- MDT

Labels: Enron, Parmalat

This is quite the story.... In Brazil, authorities rousted Kroll corporate offices and made several arrests on charges ranging from conspiracy to illegal phone-bugging and bribery in relation to a scandal that threatens to overtake the head of the Brazil's central bank, their minister for communications, and the chief one of the country's largest telecommunications firms and a Citigroup-affiliated investment banker. Meanwhile, Kroll other company executives flee the country to escape prosecution.

Just another ho-hum day at the office for the worlds "largest and most flamboyant" investigative firm, I guess.

Via the Sydney Morning Herald:

The Brazilian connection

Sydney Morning Herald
June 25, 2005

By Brazilian standards, Operation Jackal was carried out with clockwork precision. On a steamy spring day, 90 agents of the elite Policia Federal burst into a dozen homes and offices in four cities, seizing documents and computer hard drives, and arresting some of the country's most prominent businessmen.

The raids last October were the climax of a seven-month investigation into the activities of Kroll Inc, the largest and most flamboyant of the world's "risk management" companies, whose activities range from rescuing hostages to tracking down stolen treasure - and, so the police allege, illegal industrial espionage.

As the story unfolded, some of the biggest names in Brazilian business and politics were dragged into the affair - the head of the country's central bank, the minister for communications, the boss of the country's third-largest telecommunications company, an investment banker with links to America's giant Citigroup.

As the investigation widened, more than a dozen people were arrested, including executives and employees of Kroll who were initially accused by the police of crimes including conspiracy, illegal phone-bugging, and bribery. They included its joint chief executives, Eduardo Gomide and Vander Aloisio Giordano.

The boss of Kroll's Brazilian operations, its president, a 35-year-old US-educated businessman named Eduardo Sampaio, escaped the dragnet. Not long after news of the police investigation had broken four months earlier, Sampaio left the country and - to the surprise of Australia's risk management community - arrived in Sydney to take up a position as head of what is now called the Marsh Risk Consulting Group, Kroll having been taken over in the meantime (see story page 46).

However, two weeks ago, charges were formally laid against Sampaio, six other Kroll executives and contractors, and 19 other people in what has blown up into the Brazil's biggest corporate scandal.

Sampaio refused to discuss the case with the Herald on three occasions, but the worldwide boss of Marsh/Kroll consulting, Andrew Marshall, confirmed that criminal charges had been laid against Sampaio and other Kroll executives. The charges included breaches of data privacy laws, and paying public officials to obtain information - but not wire-tapping. The charges will be vigorously defended, Marshall says.

Sampaio was a high-flyer in the Brazilian business community, known on the lecture circuit as a campaigner against fraud and corruption. He graduated with an MBA from Baruch College City University in New York and, after internships with Wall Street firms, including Merrill Lynch and PaineWebber, joined Kroll and was appointed Brazilian president in 1998. In Sao Paolo, South America's biggest city and Brazil's commercial capital, he was a member of the British Chamber of Commerce ethics committee and of Transparencia Brasil, an NGO dedicated to combating corruption.

Sampaio arrived in Australia in August, two months after the scandal broke, to take up his new job running the risk management division of Marsh Ltd, a wholly-owned subsidiary of the American Marsh & McLennan corporation, and Australia's largest insurance broker with 1100 employees, and branches in every state.

The seeds of the complex scandal were planted seven years ago when the Brazilian Government broke up and privatised the old government telephone monopoly, Telebras, with riot police firing rubber bullets and using tear gas on protesters in the streets of Rio de Janeiro.

One of the companies spun off from the privatisation was Brasil Telecom, the country's third-largest fixed-line operator, headed by feisty Italian chief executive Carla Cico, who is among those charged.

For several years, Brazil's biggest corporate battle has been fought for control of Brasil Telecom between its controlling shareholder, CVC/Opportunity Partners (a $700 million venture capital fund registered in the Cayman Islands, in which Citigroup had a stake) and the Italian telecommunications company, Telecom Italia, which has been trying to increase its stake in the company.

Cico says Brasil Telecom suspected Telecom Italia had sabotaged its share price by forcing it to pay too much for a takeover target, and around 2001 hired Kroll to get the evidence to support a court case. And here the plot thickens and the stories diverge dramatically.

The police stumbled into the scandal during an unrelated investigation into suspected corruption in the Brazilian subsidiary of the collapsed Italian dairy giant Parmalat. Last March, they were bugging the phones of two former Kroll investigators - Tiago Verdial and William Goodall, a former agent of the British secret service, MI6 - who had been probing Parmalat.

During their discussions, police say they taped references to illegally intercepted emails and other communications obtained in Kroll's other investigation into Telecom Italia. Goodall fled, Verdial was flown from Rio de Janeiro, imprisoned in Brasilia, and is awaiting trial - and the police began investigating Kroll's investigators.

Last July, the story was leaked to Brazil's biggest newspaper, Folha de Sao Paolo. The dynamite was in the names on the emails, because they included two of the most senior political allies of Brazil's left-wing president for the past three years, Luiz Inacio Lula da Silva - a former shoe-shine boy and trade union leader known to his supporters as "Lula".

One is Luiz Gushiken, now Brazil's Communications Minister, a close confidant of Lula for 35 years and - when the spying allegedly took place three or four years ago - a senior official in Lula's Workers' Party. Gushiken told reporters that email correspondence between him and Telecom Italia had been illegally obtained and "showed flagrant disregard for Brazil's constitution".

The other alleged victim was Cassio Casseb Lima, now the president of the Brazilian central bank, Banco do Brasil. When his emails were intercepted he was an adviser to Telecom Italia.

Romero Menezes, the high-ranking federal police official who co-ordinated Operation Jackal, says that during the raids in Sao Paolo, Rio de Janeiro and the political capital, Brasilia - including one on Kroll's headquarters - a large amount of material was seized.

This included "sophisticated electronic eavesdropping equipment", along with records including computer hard drives containing thousands of emails which had allegedly been "purchased" from junior employees of banks and other institutions for $100 to $200 a time.

Kroll - which was in the throes of being taken over by the US insurance broking giant Marsh & McLennan at the time - said the raids on its offices had been done in "a climate of panic and total intimidation". It took out advertisements in Brazil's leading newspapers to deny the police allegations that it was involved in bugging and hacking - the company says that it was, in fact, anti-bugging equipment that was seized.

Company spokeswoman Jodie Rosenbloom said: "We categorically deny we have done anything wrong. We always act within the laws of Brazil and all of the countries in which we do business ... the allegations against [Kroll's employees] and our company will eventually be proved false."

In response to the Herald's inquiries, Kroll's Andrew Marshall says Sampaio played no part in the Telecom Italia investigation - although he was president of the company at the time. He says Sampaio's transfer to Australia was planned before the police raids.

Marshall says that no arrest warrant has been issued for Sampaio. "The Brazilian authorities are simply requesting that Eduardo and the others come in and make statements," he says. "He may go back to Brazil to contest the matter - that is something that is up to him."

Marshall says he does not believe the charges will affect Sampaio's ability to run Kroll in Australia: "In the UK or the US or Australia, if charges are hanging over your head, it is a very big, bad thing," he says. "But it doesn't work the same way in Brazil, although it is very stressful for Eduardo. I realise that it sounds deeply bizarre, but it could take a decade to go through the Brazilian court system."

If an arrest warrant is issued - the case is before Federal Judge Silvio Luiz Ferreira da Rocha in the Fifth Criminal Court in Sao Paolo - Sampaio will have the option of returning to Brazil to contest the charges in court, or extradition. Brazil and Australia signed an extradition treaty in 1996.

In April, the scandal claimed another high-profile victim when the federal police arrested banker Daniel Dantas, president of CVC/Opportunity Partners and controlling shareholder of Brasil Telecom, accusing him of criminal conspiracy, breach of confidentiality and corruption. He has also now been charged.

Citigroup announced that it had fired Dantas and was suing him for $US300 million ($389 million) in the New York District Court, alleging fraud and deception in the operation of the venture capital fund.

The extraordinary case even threatened to damage US-Brazil relations - already strained because of US mistrust of Lula's populist policies - when Gushiken and other senior government officials suggested Kroll's alleged spying may have had a political dimension, and threatened to shut down the company's local operations.

The original article appears here.

-- MDT

Labels: bribery, data breech, Kroll, Parmalat

Over the weekend a judge in Milan formally charged 15 Parmalat executives and three financial institutions in connection with the billion-dollar fraud that was perpetrated at the food industry behemoth. Along with the company executives the Italian offices of Bank of America, Deloitte and Touche, and Grant Thornton were indicted for misleading investors and just generally being unable to provide a credible explanation for the multi-billion dollar hole that was uncovered in Parmalat's books.

The charges have been brewing since late 2003 when Parmalat declared bankruptcy. This week jail sentences were finally meted out to eleven of the executives charged in the corporate scandal that has come to be called Europe's Enron. Based on a plea agreement with prosecutors, the eleven executives accepted sentences ranging from one year to thirty months in jail in exchange for acknowledging their wrongdoing.

While the maximum term in Italy for market manipulation is five years, the abbreviated terms of service described in the plea agreement mean that few if any of the executives party to the agreement will ultimately serve any time behind bars. Nine of the eleven executives have already had their sentences suspended and the other two have the option of petitioning to have their terms commuted to community service.

And while some of the guests appear to be leaving the party, the festivities aren't over quite yet. According to Milan Prosecutor Francesco Greco, "We have managed to complete the first phase of our investigation within an acceptable timeframe, considering the large number of defendants involved...Now we are close to filing our indictment requests for the second phase of the investigation, which targets the banks.'' Prosecutors are also conducting a separate probe on other charges including fraudulent bankruptcy, but have yet to ask for indictments.

-- MDT

Labels: Enron, Grant Thornton, Parmalat

It has been quite rocky recently for the house that J. Pierpont Morgan built - slipping business, executive turnover and legal costs galore helped Morgan Stanley's pre-tax profits slip some 27%, with revenue dropping by more than $6 billion.

Last week embattled chief executive Phillip Purcell announced amid controversy that he would be stepping down from his position. Purcell, 61, cited plans to retire as his reason for leaving the firm. Purcell also alluded in a letter to his staff to "personal attacks" against him, which can be presumed to encompass the mounting pressure from irate shareholders as well as the rebuke of eight retired executives who complained that his poor management has resulted in years of lackluster performance at the firm.

This week a Florida judge declined Morgan Stanley's request to set aside the $600 million-plus in compensatory damages awarded to Ron Perleman. The Revlon executive claimed in a recent lawsuit against Morgan Stanley that the brokerage house had assisted client Sunbeam in artificially inflating the value of their stock, cheating Perelman our of more than a billion dollars in a stock-swap deal. There is also the quibbling matter of the additional $850 million in punitive damages awarded to Perelman by the jury that is left to resolve. Morgan Stanley expects to appeal the decision (wouldn't you?).

The Perelman suit isn't the only legal snarl on Morgan Stanley's radar. Just today, Parmalat announced that it had settled with the brokerage firm and that Morgan Stanley would be paying the bankrupt European agricultural giant some $242 million to settle "all existing and potential actions and claims, including compensation of damages." The lawsuit brought by Parmalat against Morgan Stanley was one of a number of suits filed by the company against third parties in an effort to reclaim damages from firms that contributed to the fraudulent activities that led toParmalat's bankruptcy.

One thing is for sure, whoever they bring in as the new Chief Exec. will have their hands full. And how...

-- MDT

Labels: Morgan Stanley, Parmalat

Via Bloomberg:

Parmalat Prosecutors Accept Plea Agreement With Ex-Accountants

April 5, 2005
By Sara Gay Forden

Milan prosecutors probing the collapse of Parmalat Finanziaria SpA, Italy's biggest bankruptcy, accepted plea agreements with two former company accountants, who would receive reduced prison sentences.

Gianfranco Bocchi and Claudio Pessina will plead guilty to market manipulation in exchange for a one-year prison sentence Pessina's lawyer Oreste Giambellini said today. The charge carries a maximum penalty of five years in jail

This morning the prosecutors gave their approval to the requests for plea agreements by nine defendants, including Claudio Pessina,'' Giambellini said in a telephone interview.

The maker of Santal juices and Kyr yogurt went bankrupt in December 2003 and later disclosed more than 14 billion euros ($18 billion) of debt, about eight times the amount reported by its former management. Milan prosecutors have requested indictments against Parmalat founder Calisto Tanzi and 28 others, including Bocchi and Pessina.

Judge Cesare Tacconi, who is conducting the preliminary hearing in the Milan criminal case, must approve the plea agreements.

Eugenio Fusco, one of three prosecutors investigating Parmalat in Milan, also accepted a plea agreement with the company's former finance director, Fausto Tonna, who would receive a prison sentence of 2 years and six months, Italian news agency Radiocor reported, without saying where it got the information.

Oreste Dominioni, Tonna's defense attorney, didn't immediately return a phone call seeking comment on the matter.

Prosecutors in Milan and Parma are investigating evidence of more than a decade of fraud at the company founded by Tanzi in 1961.

The original article can be read here.

-- MDT

Labels: Parmalat