The scandal dubbed "Europe's Enron" has stunned the country as Parmalat dives into bankruptcy protection.
By Associated Press
Published December 25, 2003
ROME - Police investigating fraud in the Parmalat scandal searched the home of the food company's founder Wednesday, hauling out boxes of documents in a hunt for evidence to explain the stunning near collapse of a one-time model of Italian industry.
The company formally filed for bankruptcy protection as the Industry Ministry appointed an expert to develop a restructuring plan to save the company based in Parma that employs thousands worldwide.
The case, dubbed "Europe's Enron," has shaken Italy's business leaders, who for years touted Parmalat as a proud symbol of northern Italian, family-run enterprises that help drive the economy - including the Fiat automaker in Turin, Benetton apparel in Treviso and Premier Silvio Berlusconi's Mediaset in Milan.
Since the scandal broke Friday, evidence has mounted of a vast hole in the company's balance sheet. The latest Italian reports said a total of about $12-billion could be missing from Parmalat accounts after what may have been 15 years of false accounting.
The scandal also raised questions about Italy's regulatory framework. Berlusconi has said the case damaged the country's credibility and reputation, and his government promptly intervened Tuesday with a bankruptcy-protection law tailored to save Parmalat and the jobs of 36,000 people it employs in 29 countries.
The government appointed Enrico Bondi, who became Parmalat CEO this month after founder Calisto Tanzi was ousted, to the post of special commissioner Wednesday under the bankruptcy-protection plan.
Bondi, who has a reputation as a corporate savior after rescuing chemicals group Montedison SpA from bankruptcy in the early 1990s, must draw up a restructuring plan for approval by the Industry Ministry.
Prosecutors have placed Tanzi and 20 other officials, including former finance directors, under investigation for possible fraud and other charges concerning the suspected falsification of company documents.
The financial police branch searched Tanzi's home near Parma for several hours Wednesday, hauling out boxes of documents and handing them over to investigators. Tanzi himself was not there, and reports said he left the country.
The founder's son, Stefano, said he did not know where his father was.
He "knows his father is not in Parma, but hasn't had communication with him for some days," lawyer Sergio Ravaglia said from Milan.
The elder Tanzi has kept a low profile and not offered a public defense since the scandal broke.
Parmalat revealed Friday that Bank of America Corp. was not holding about $4.9-billion of its funds, as the Italian company reported in September. Since then, the estimated amount of money missing from the balance sheet has ballooned.
The bank says the letter guaranteeing the $4.9-billion was fake. Bank of America, based in Charlotte, N.C., also said it has filed a criminal complaint with Italian authorities.
"Bank of America is continuing to cooperate fully with both U.S. and Italian and other legal and regulatory authorities," the company said in a statement.
"Because we believe a potential crime may have been committed under Italian law, we have made a request to the proper Italian authorities that a criminal proceeding be started against those who may be responsible."
Milan business newspaper Il Sole-24 Ore reported Wednesday that former Parmalat chief financial officer Fausto Tonna told investigators there had been systematic falsifying of accounts at Parmalat for 15 years and that he was taking orders from superiors.
Giuliano Panizzi, a consultant who worked with Parmalat for more than 15 years, told Il Sole-24 Ore he was unaware of any fraud. But if it happened, he suspected management - not just fiddling financiers.
"If what is emerging is all true, the hole has huge, unthinkable dimensions," he said.
"I don't believe that there were personal enrichments. The false accounting was probably done to cover up industrial and financial losses, not to extract money from the company."
Tanzi founded the company in 1961 and ran it until earlier this month, when he was replaced by Bondi. Shortly thereafter, Parmalat's balance-sheet hole came to light.
The company, which has annual sales of about $9.2-billion, produces and sells milk, yogurt, juice and other food products around the world.
Its products include UHT milk, which is processed at ultrahigh temperatures so it can be stored without refrigeration for months.
