Net spreads in hunt for missing Cayman Islands billions

Thursday, January 1, 2004

ROME, Italy (AFP): The net spread on Wednesday in the hunt for billions of dollars missing from Cayman Islands subsidiaries of failed Italian food giant Parmalat with seven arrests in a scandal which US experts say is one of the biggest frauds in history.

In the fast-moving multinational drama, Italian police arrested senior finance, accounting and legal executives associated with the group and magistrates issued a warrant against the head of Parmalat in Venezuela.

Meanwhile, US securities inspectors arrived in Italy and magistrates summoned San Paoli Imi bank president Rainer Masera for questioning.

Masera was questioned as someone "with knowledge of the facts", a status which does not mean that he is being investigated. San Paoli Imi is one of the biggest banking groups in Italy.

Sources close to the investigation say that Calisto Tanzi, the arrested Parmalat founder at the centre of the scandal, had told interrogators he had tried to mount a last-minute rescue led by San Paolo Imi.

One report said that investigators trying to penetrate the Parmalat affair were also interested in any role played by Bank of America.

Police arrested two former Parmalat finance directors, Fausto Tonna and Luciano Del Soldato, and also seized accountants for the group and senior executives of auditors Grant Thornton.

Tonna was for many years Tanzi's right-hand man and was group finance director until March of this year. He has reportedly admitted falsifying Parmalat accounts but said that he did so on instructions from Tanzi.

Del Soldato succeeded Tonna as finance director.

The accountants are accused of having forged documents to falsify the accounts so that a hole of about 12 billion dollars would not be noticed.

The executives at Grant Thornton, including the country head for Italy Lorenzo Penca, are suspected of helping Parmalat to falsify its results by providing legal and financial advice.

A lawyer, Gianpaolo Zini, regarded as Tanzi's confidant, was also arrested and his offices in Milan were searched. The outstanding warrant names the Parmalat head in Venezuela, Giovanni Bonici.

Since Tanzi was arrested on Saturday, the vast extent of the affair has unfolded daily with much attention on his children Francesca and Stefano.

Meanwhile, the multinational, the eighth-biggest industrial group in Italy with more than 36,000 employees in 30 countries, hangs on any new crisis bank loans, and on an administrator working on a rescue while trying to recover funds said to total 12-15 billion dollars.

Tanzi has reportedly admitted embezzling 630 million dollars, largely to shore up his daughter's failing tour operator Parmatour.

Stefano, a former senior Parmalat executive and head of the Parma football club, now facing difficulties over the scandal, was interviewed at length on Tuesday.

Late on Tuesday the US Securities and Exchange Commission (SEC), which polices stock market activities in the United States, laid a court complaint alleging that "Parmalat engaged in one of the largest and most brazen corporate financial frauds in history".

The SEC, which sent inspectors to the group's headquarters in Parma, north Italy, on Wednesday, alleges that the company misled US investors by over-stating assets and under-stating-debts.

Front-page stories in the Financial Times and Wall Street Journal Europe newspapers gave extensive space to many aspects of the affair.

The Financial Times highlighted a decision by government- appointed special administrator Enrico Bondi to associate Parmalat with fraud charges against Tanzi.

And it quoted people close to the daily interrogation of Tanzi, as reporting he had declared: "I am the head: at the end of the day for good or bad, everything must fall back on me."

The Wall Street Journal, noting that Tanzi had not yet been formally indicted, alleged that Parmalat documents had been poorly forged for years with scanning and photocopying.

Nobody outside the company had noticed until Bank of America "informed it that a bank account purportedly held by a Cayman Islands unit called Bonlat Financing Corp., and containing 3.9 billion euros, didn't exist".

Ten days ago Bank of America laid a fraud complaint in Milan concerning Parmalat.

Even so, the Italian news agency ANSA alleged that investigators also suspected employees of Bank of America of "having been aware of, and perhaps even of having participated in, what happened at Parmalat", and said that three lawyers from the bank were in Parma to talk to investigating magistrates.

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