Parmalat Execs Under Investigation
Parmalat Execs Under Investigation
Dec. 22, 2003
ROME (AP) _ The founder of Parmalat Finanziaria SpA, Calisto Tanzi, and other company officials were placed under investigation Monday, days after the Italian dairy company revealed a massive financial hole, news reports said.
Top executives were also being investigated by magistrates in Milan, the Italian news agency ANSA and other reports said.
Meanwhile, the new chairman and other executives were scrambling to save the company, which is teetering on the edge of default.
Details on the investigation were not immediately available. The reports said investigators were looking into possible fraud and other charges relating to the suspected falsification of company books, according to the reports.
Tanzi founded the company in 1961 and ran it until a board shakeup earlier this month amid the ongoing scandal.
Prosecutors have been looking into whether a crime may have been committed in the case, and on Saturday police raided the Milan offices of Parmalat auditor Grant Thornton and carted off boxes of documents.
The company's chairman and chief executive, Enrico Bondi, was meeting with Industry Minister Antonio Marzano in Rome, while Parmalat Italia's director general, Carlo Prevedini, met with union representatives in Parma, the northern city where the embattled company is based.
The union representatives were seeking reassurances on job security, production levels and bankruptcy protection, officials said.
Late last week, Premier Silvio Berlusconi said the government would intervene to bail out the company. ``The situation is very serious,'' he said Saturday.
Details of the plan the government is drawing up have not been released, but Berlusconi said it would be discussed at a Cabinet meeting Tuesday.
Parmalat is expected to call a board meeting, also on Tuesday, to seek protection from creditors by declaring bankruptcy.
The company made international headlines Friday when it stated that the Bank of America Corp. was not holding about euro3.95 billion ($4.91 billion) of its funds that the Italian company had reported in September. The letter guaranteeing the funds was fake, the bank said.
The disclosure confirmed investors' fears that the company, which nearly defaulted on an euro150 million ($186.5 million) bond last week, was in worse financial condition than stated on its Sept. 30 balance sheet. It also fueled accusations by ratings agency Standard & Poor's that Parmalat had misled investors.
Late Friday, S&P downgraded Parmalat to D, its lowest rating, saying the company's failure to buy out minority shareholders in its Brazilian subsidiary by a Wednesday deadline represents a default under its criteria.
That could trigger a cross default on the company's euro6 billion ($7.3 billion) in gross debt, though market participants said the company won't officially be in default until a grace period passes on the missed payment.
Parmalat must make more than euro100 million ($124.4 million) in bond payments in January and February, as well as meet a euro200 million ($248.7 million) payment to a Brazilian subsidiary on Monday, according to the Italian press. Parmalat's total debt as of Sept. 30 was around euro6 billion ($7.3 billion).
Parmalat, which has an annual sales of around euro7.5 billion ($9.2 billion), produces and sells milk, yogurt, juice and other food products in Europe, the United States and around the world.
On Monday, Swiss food and beverages company Nestle denied a newspaper report that it was interested in taking over parts of Parmalat.