ITALY: Parmalat Fraud Hearing Opens

Two and a half years after the $18-billion (U.S.) collapse of the Parmalat dairy company, a closed-door preliminary hearing opened Monday in Italy's main criminal proceedings to arise from Europe's largest corporate failure.

"I hope this sends a message to the world of the seriousness of the trial," said Antonio Tanza, one of several lawyers filing into the courthouse before the preliminary hearing started.

Among the 64 people who risk fraud charges during the hearing in this northern Italian city are Parmalat founder and former CEO Calisto Tanzi, who was forced to resign as Parmalat sped toward bankruptcy in December 2003, and his longtime right-hand man and chief financial officer, Fausto Tonna.

Prosecutors in Parma also are investigating the role of Parmalat's creditor banks in the collapse.

Mr. Tanzi, who in another Parmalat trial in Milan asked investors to forgive him, has blamed banks for leading the dairy company to its downfall, claiming they were the ones pushing the sales of bad bonds to investors.

"Tanzi obviously can't have great expectations from this trial ... what he expects is a point-by-point reconstruction. He doesn't hope to be acquitted," said his lawyer, Gianpiero Biancolella, who on Monday entered files into the proceedings related to the banks' involvement.

"What happened to Parmalat should not have happened," Mr. Biancolella said, adding that Parmalat was already having financial problems by the end of 1994 and should not have been selling bonds for tens of billions of dollars.

"At the end of this it would be enough for us that the responsibility of the banks is recognized," said the lawyer Mr. Tanza, who works for a consumer group representing 1,000 of an estimated 35,000 to 40,000 shareholders, savers and investors who have lost money in Parmalat's collapse.

Parmalat's clean image as a simple dairy business - even though it sold milk, juice and baked goods in 30 countries - masked a tangled financial web that unravelled when the company acknowledged a crushing debt of 14 billion euros, eight times higher than previously claimed.

The case in Parma is just one of several against former executives and others accused of contributing to the alleged fraud that concealed the company's mounting debt. But it is the most important because it alleges fraudulent bankruptcy and in some cases criminal association, and carries the highest penalties: up to 15 years in prison.

Mr. Tanzi, who was not required to appear in court, did not attend Monday's proceedings. Mr. Biancolella said his client was not feeling well and would undergo medical tests in the afternoon.

Three days have been scheduled for the preliminary hearing, but court officials say the process could extend for months as some defendants are expected to seek pretrial plea agreements.

The trial itself is not expected to begin before fall.

Because of the number of defendants, the hearing is in a renovated sugar factory, now a convention centre - where shareholders in the new Parmalat held their first meeting in November, a month after Parmalat Finanziaria SPA returned to the Milan stock exchange.

In other criminal proceedings, Milan prosecutors opened a trial in September against Mr. Tanzi and 15 others on charges of market rigging, providing false accounting information and misleading Italy's stock market regulator. The maximum sentence is five years. Mr. Tonna was sentenced to 2 1/2 years in prison in the same case after reaching a pretrial plea agreement, along with 10 others, last June.

A preliminary hearing is scheduled June 30 in yet another Milan case, this one against banks accused of securities law violations for allegedly providing false information on Parmalat's finances to investors. The banks have denied wrongdoing.

The Parmalat failure is also the subject of civil cases in the United States. In New York, the lead plaintiffs in a consolidated shareholder lawsuit have filed a motion to add the reorganized company as a defendant. According to court documents, the lead plaintiffs said they believe they can bring claims against the reorganized Parmalat because the new entity assumed all of the former company's prior assets and liabilities.

AMP Section Name:Food and Agriculture
  • 185 Corruption

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