Europe’s Enron
December 9, 2010
The Parmalat scandal seven years ago destroyed the savings of some 135,000 people and left a14 billion euro ($19 billion) hole in the company's finances.
On Thursday, an Italian court is meeting to hand down verdicts on the former managers of the Parmalat food conglomerate.
The founder and CEO of Parmalat, 72-year-old Calisto Tanzi, had already been sentenced to 10 years in prison for stock market manipulation in a separate trial. Prosecutors have asked for a 20-year sentence for Tanzi as he is accused of a range of financial crimes.
The prosecution has also asked for prison sentences for 16 other defendants including 12 years for Tanzi's brother Giovanni, and nine and a half years for Fausto Tonna, the group's former financial director.
The scandal
At the time of its collapse, Parmalat employed around 36,000 people in 30 countries and was one of the leaders in the Italian business world.
The food company specialized in UHT (Ultra High Temperature) milk and daily products.
However, in December 2003 it emerged that the company had a 14 billion euro hole in its financing, and had been in trouble for many years. The company's financial woes had been covered up by major falsifications of balance sheets and sophisticated financial fiddling.
Parmalat shares lost 97 percent and the company was de-listed from the stock exchange. The firm was dubbed “Europe's Enron” and is one of Europe's biggest ever financial scandals.
"Parmalat was the symbol of a sick system and the biggest debt factory of European capitalism," investigator Lucia Russo said during the trial.
Link to the banks
During the trial, Tanzi's defence blamed the banks that sold Parmalat bonds to small time investors, even when they knew the group was insolvent.
The responsibility of Citigroup, Deutsche Bank, Morgan Stanley and Bank of America is the subject of another trial that is ongoing in Milan.
The banks are charged with stock manipulation and if found guilty could face fines of up to 5 million euros and have their profits seized.
Following the scandal, Parmalat have continued to produce dairy products, retaining the name and the production facilities. However, all the company's debts were wiped out before it was re-listed, so its past history does not affect its stock today.
Author: Catherine Bolsover (AFP/AP)
Editor:Susan Houlton