Billion-dollar lawsuit filed by Parmalat investors over Cayman Islands scheme

Tuesday, January 6, 2004

NEW YORK, USA (AFP): A lawsuit filed Monday on behalf of US shareholders in scandal-plagued Italian food giant Parmalat seeks at least one billion dollars for investors victimized by "one of the largest financial frauds ever perpetuated."

The suit names two senior Parmalat executives and financial, auditing and legal firms accused of engineering a fraud scheme that allegedly diverted one billion dollars to themselves while investors bought five billion dollars of overvalued Parmalat securities.

"This action arises out of one of the largest financial frauds ever perpetrated," the suit states.

"Parmalat's senior insiders, together with Parmalat's legal, accounting and financial advisors concocted a massive scheme whereby (the) defendants overstated Parmalat's reported profits and assets by billions of dollars for more than a decade."

Named in the suit are former Parmalat chairman Calisto Tanzi and former chief financial officer Fausto Tonna.

It also names US finance giant Citigroup, auditors Deloitte Touche Tohmatsu and Grant Thornton International and their Italian affiliates as well as the law firm of Zini and Associates, alleged to have helped facilitate the fraud.

The suit alleges that Parmalat and its advisers created a complex web of offshore shell companies, sham transactions, manipulative financing transactions and forged documents to falsify Parmalat's financial statements for more than a decade.

This scheme, the suit alleges, overstated Parmalat's assets by at least 4.9 billion dollars and understated liabilities by at least 3.6 billion.

A fictitious 4.9 billion dollar bank account was set up through Bonlat Financing Corp., a wholly-owned Parmalat subsidiary based in the Cayman Islands, to carry out the scheme, according to the suit.

The lawsuit accuses audit firm Grant Thornton of working with the Parmalat executives "to conduct fictitious transactions within Bonlat and thereby ensure that investors would not discover that Parmalat's consolidated balance sheet and income statements were artificially inflated."

The suit also contends that the Zini law firm also helped create partnerships and other entities "knowing these were manipulative devices and contrivances ... to falsify Parmalat's reported financial results and financial condition."

"Tanzi and Tonna did not act alone," said Darren Robbins, another attorney in the case. "There would be no fraud without the active participation of certain Parmalat financial advisors, accountants and lawyers."

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