Parmalat's Cayman Islands books a work of fiction

Thursday, January 15, 2004

LONDON, England: Parmalat used the Cayman Islands to raise more than US$1 billion in funds through issues of bonds, notes and shares, according to people close to investigations into the scandal-hit Italian dairy group.

The Financial Times reports that the $1 billion is apparently separate from the $5 billion that Bonlat Financing Corp., a Parmalat subsidiary in Cayman, wrongly claimed it had in a bank account, and underlines how Cayman played a pivotal role in the dairy group's finance operations.

Parmalat plunged into crisis last month when Bank of America revealed that an account with cash and securities purportedly held by Bonlat and worth $5 billion did not exist. The funds had been consolidated into Parmalat's 2002 group accounts.

The black hole in Parmalat's balance sheet is an estimated at $13 billion, and people close to the investigations said the group appeared to have significant assets that are exaggerated or fictional.

Other people familiar with the probes said it was unclear how much of the $1billion of funds raised in Cayman was real or fake. "We cannot tell if it is fictional or genuine," said one.

Two entities in Cayman are believed to be organised as trusts, with Calisto Tanzi, Parmalat's jailed founder, as the sole beneficiary, reportedly holding an account with about $70,000 in it.

The Cayman government launched an investigation before Christmas to establish if people here connected to the Parmalat-related companies had committed fraud or money- laundering offences, but the inquiry is thought to have found no wrongdoing so far.

Detective Chief Inspector Henderson Hunte of the Cayman police he hoped the investigation would conclude within two weeks, but was still seeking more information about Parmalat entities on the islands.

Law firms and banks in Cayman that dealt with the entities filed suspicious activity reports to local regulators after Parmalat's implosion, and details have been passed to Italian and US law enforcement units.

Food Holdings Ltd and Dairy Holdings Ltd, two Parmalat-related companies in Cayman that raised an estimated $320 million through note issues, were put into provisional liquidation just before Christmas.

Parmalat Capital Finance, the dairy group's most significant Cayman company, established in 1997, was also put into provisional liquidation. It is the parent of Bonlat.

According to Bloomberg News, the Cayman office of accounting firm Grant Thornton incorporated Bonlat in November 1998 through a subsidiary, Caribbean Management, said Ian Johnson, a Grant Thornton partner in Grand Cayman and a director of Caribbean Management. 

Like other Grant Thornton International offices, the Cayman office is independently owned. Bonlat's Cayman Island address of record was the same as Caribbean Management's address until the Parmalat subsidiary was moved to Maples and Calder, Cayman's largest law firm, in 2002. 

Grant Thornton International last week expelled its Italian member firm, Grant Thornton SpA, which was responsible for auditing Bonlat.

"This office didn't do any audits for Parmalat entities," said Johnson in an interview at the office shared by Grant Thornton and Caribbean Management. "How they went about the audits, we have no information." 

He said the Grant Thornton office in Cayman knew nothing about Bonlat's Bank of America accounts.

"We had no reason to know what the assets were. As a registered office, we were simply their location on the island. We knew the directors. We knew it was owned by Parmalat. That's all." 

Nan Williams, an outside spokesperson for Grant Thornton International in London, agreed that no audit work had been done for Bonlat by the accounting firm's Cayman office. 

"The Grant Thornton International investigation into the Parmalat matter is continuing," she said. 

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