Italy fears Enron-size crisis following disappearance of Cayman Islands assets

Sunday, December 21, 2003

ROME, Italy: The crisis at Italian agri-food giant Parmalat, described by Economy Minister Giulio Tremonti as "Europe's Enron", sent shockwaves through Italian industry Saturday after the apparent disappearance of billions of dollars of assets it had supposedly held in the Cayman Islands.

"The situation is very serious," Prime Minister Silvio Berlusconi said, announcing his government would intervene to try to salvage the agri-food giant "to restore confidence and the country's reputation".

The scandal, sparked by the discovery of a four billion-dollar "hole" in its accounts, centers around Parmalat's Cayman Islands subsidiary Bonlat Financing Corporation and a Cayman Islands-based investment fund Epicurum.

"The government will intervene above all to save the company and its industrial sector and to save the jobs...." Berlusconi told an end-of-year press conference in Rome.

He said Tremonti, whose "Enron" remark was reportedly made at a cabinet meeting, which discussed the crisis on Friday, would submit rescue proposals to a cabinet meeting on Tuesday.

"Savers and the credibility of the Italian economy are being affected" by the crisis, Berlusconi said.

"Control systems do not seem to be operating. The government will intervene to restore confidence and the country's reputation," he added, warning there would be an investigation into who was responsible for the crisis.

Italy's media questioned the chain of responsibility, "the dark zones of the banking and financial system", and the apparent lack of oversight of one of the world's biggest dairy groups, with an annual turnover of 7.6 billion euros.

Like the collapse of the US energy giant Enron, La Repubblica said, the Parmalat scandal "raises questions not only about the customs of our capitalism, but also the entire apparatus of regulations, checks, and monitoring mechanisms".

The bankruptcy of the seventh largest US company in 2001 after the disclosure of a myriad of schemes to inflate profits and hide debt, also involving Cayman Islands entities, sparked major concern about US corporate accounting and disclosure practices.

The Cayman Islands Monetary Authority (CIMA) released a statement last week following the non-payment of approximately $600 million which Parmalat had expected to recover from Epicurum, an obscure mutual fund registered in the Cayman Islands.

In its statement, CIMA emphasised that, "although Epicurum Limited is listed with the Registrar of Companies, the company is not registered or licensed with the Authority.

"Epicurum does not need to be registered or licensed with CIMA as it falls within the exemption allowed under Section 4(4) of the Mutual Funds Law (2003 Revision) (the "Law")," explained the authority. "In effect, this provision of the Law allows closely held funds with fewer than 15 investors to be exempt from being registered or licensed with the Authority."

The registered office of Epicurum in Cayman is provided by what appears to be the corporate services subsidiary of one of the Islands' largest law firms, which has not responded to requests from Cayman Net News for comment in relation to the situation. 

The Authority explained that, "the exemption of certain classes of mutual funds and investment companies with small numbers of investors from regulation is not unique to Cayman. In the United States for example, certain investment companies with 100 or fewer investors not making a public offering of its securities are exempt from regulation. Similarly, certain funds owned exclusively by "qualified purchasers" are also excluded from regulation."

The Authority stated that it does, "enforce compliance with its anti-money laundering laws and regulations when an entity is conducting relevant financial business in the Cayman Islands."

The Authority added that it would follow developments with the fund closely, despite it not being a regulated entity in the Cayman Islands.

  Back...

  Most popular articles: viewed, printed and e-mailed

  Printable version