Cayman government to investigate Parmalat entities

Tuesday, December 23, 2003

GEORGE, TOWN, Cayman Islands: The Cayman Islands Attorney General, Mr Samuel Bulgin, has announced that the Cayman Islands Monetary Authority (CIMA) has launched an investigation into Bonlat Financing Corporation, a Cayman-registered subsidiary of the crisis-stricken Italian food group Parmalat, and a mutual fund, Epicurum, which Bonlat appears to have run.

CIMA had previously issued a statement saying that Epicurum was neither registered with nor licensed by it, and therefore not monitored, because it had less than 15 investors.

"It is only appropriate that we launch an investigation to see whether any offenses, including money laundering and/or fraud, were committed in this jurisdiction," Bulgin told Reuters. 

"All the Parmalat subsidiaries in Cayman will be investigated. Epicurum and Bonlat are the only ones we are aware of so far (but) I don't know where the paper trail will lead us." 

Parmalat invested over US$600 million in Epicurum, which it has been unable to recover.

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

However, the missing US$600 million in Epicurum now pales in comparison to another four billion-dollar "hole" in Parmalat's accounts, which also centres on its Cayman subsidiary Bonlat Financing Corporation.

The group had used a Bank of America document to certify to its auditors that the money was in an account at the bank. But that document has now been disowned by Bank of America as a fake, sparking a massive investigation in Italy and casting doubt on the existence of a slew of other supposed Parmalat assets.

The Financial Times, citing people familiar with the case, said the hole could amount to more than eight billion dollars, and the Italian daily Corriere della Sera reported that there could be up to four billion more.

The Rome paper said that in addition to an eight-billion-dollar shortfall there were now "very serious doubts" about the existence of other assets claimed by the group that could be worth around four billion dollars.

Calisto Tanzi, the founder and former chief executive of the group, was placed under investigation Monday by a Milan court and questioned along with two finance executives and several other individuals.

The judges in charge of the case confirmed during the hearings that the accounts of Parmalat's Cayman Islands subsidiary had been "falsified," news agencies Ansa and Radiocor reported, citing court sources.

The judges also could identify the people responsible for falsifying the accounts, the agencies reported.

Many of Italy's biggest banks are exposed to Parmalat, leading to fears of a system-wide meltdown if the company were to collapse.

Italy's Economy Minister Giulio Tremonti has described the crisis at Parmalat as "Europe's Enron".

Italy's media has 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 approaching 10 billion dollars.

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 concerns about US corporate accounting and disclosure practices.

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