Parmalat investigators may be looking at firms in Cayman

Sunday, January 25, 2004

MILAN, Italy: Italian magistrates have reportedly requested that US banks Citibank and Bank of America be put under formal investigation, as well as firms located in several tax havens, in order to gather information on companies connected with the failed Italian dairy group that were created in the Cayman Islands.

The massive financial scandal at Parmalat also took a sinister twist late Friday with the report that an aide to its former financial director had committed suicide.

Alessandro Bassi, a 32-year-old aide to former financial director Fausto Tonna, threw himself from a highway bridge near the northern Italian city of Parma, Italy's ANSA news agency reported.

Bassi, who leaves a wife and two children, had faced questioning by magistrates earlier this week but had not been charged with any wrongdoing.

Financial police investigating the Parmalat scandal raised the stakes sharply this week when they searched the Milan offices of credit rating agency Standard and Poor's, US bank Morgan Stanley and German bank Deutsche Bank.

Standard and Poor's is a leading international credit rating agency. Such agencies are vital to investors because they monitor the financial standing of companies in great detail and sell analyses of their findings.

An S&P spokesman said the ratings agency itself was not under investigation and that the search was aimed at looking for information received from Parmalat.

"We welcome the opportunity to cooperate with the Italian authorities," said a spokesman for S&P in London. "We are victims of what appears to be a massive case of fraud and deception," he said.

According to the Italian news service AGI, the Milan prosecutor's office has stated, "Morgan Stanley functionaries have worked in agreement with the Parmalat functionaries in order to keep its stocks up, fully aware of the real crisis situation the group was in."

Morgan Stanley issued a statement saying it had behaved "completely correctly" in relation to Parmalat.

Investigating magistrates had already said they wanted to know why Deutsche Bank reduced its holding in Parmalat from 5.1 percent in November to 1.5 percent in mid December, shortly before the dairy group was shown to be in financial crisis.

As expected, the Netherlands' Authority for the Financial Markets has begun a full-scale probe into the Dutch units of Parmalat, through which the Italian company issued most of its bonds, AFM spokesman Seger Pijnenburg said last week.

The AFM is investigating whether the issue of these bonds met legal requirements in the Netherlands, he said.

The AFM said it is also working with the supervisory authority in Italy as well as the Netherlands Antilles, where Parmalat had offshore financing vehicles.

According to the magazine 'Panorama', at least 300 people in the Parmalat group knew about the use of false invoices at Parmalat. The overall turnover of false invoices and bank receipts, said the magazine, totalled some $4 billion per year, and allowed the company to multiply its reported profits by a factor of 6 or 7. 

The fraud was allegedly based on a Citigroup company, Archimede. According to Parmalat executives under investigation, Citigroup knew about the false invoices "at least from 1995".

Parmalat's former finance director Fausto Tonna has told investigators that company founder Calisto Tanzi skimmed "at least 1.8 billion dollars in 10 years" from the company, the newspaper Corriere della Sera alleged.

Officials are searching for up to 16.5 billion dollars that are missing from the group's accounts.

The newspaper reported that Tanzi, former chairman of Parmalat, had placed 2 million dollars in Monaco, a Mediterranean principality.

Tanzi denied ever having an account in the principality, but officials found a payment order for 2.4 million dollars in favor of a Credit Suisse branch there, the newspaper added.

According to 'Panorama', documents in the hands of investigators apparently show that Tanzi had other off-the-books funds totaling some 8 million dollars on a bank account at the Maduro and Curiel's Bank of Curacao (Dutch Antilles), and that his nephew, Paola Visconti, withdrew $350,000 from a subsidiary Streglio for "personal expenditure".

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