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Parmalat founder sentenced to 10 years for role in fraud scheme

By Bernard Hibbitts (editor) and University of Pittsburgh School of Law students.

[JURIST] An Italian court in Milan Thursday sentenced Parmalat SpA founder Calisto Tanzi to 10 years in prison for his role in the collapse of the Italian dairy giant. Tanzi is the first executive to be sentenced in connection with the €14 billion fraud scheme in 2003 that bankrupted the company. He was convicted of fraudulent bankruptcy and criminal association for allegedly concealing the company's debt. Seven other defendants were acquitted, including three former Bank of America employees and the former head of Parmalat Venezuela. An eighth corporate defendant, former Parmalat auditor Italaudit, was fined €240,000 and had €455,000 confiscated. Parmalat filed for insolvency in December 2003 after discovering accounting discrepancies totaling nearly $5 billion in debt. Tanzi was indicted along with approximately 20 other executives in July 2007. In June 2007, an Italian judge indicted four banks - Citigroup, UBS, Morgan Stanley, and Deutsche Bank - in connection with the fraud. Suits and counter-suits have been filed in both Italy and the US against a number of parties, including Citigroup and Bank of America. Bank of America is pursuing a counterclaim against Parmalat, alleging the company engaged in fraud and is maliciously suing the bank to shift blame. In November 2006, a US district judge directed the companies to seek a settlement, but no settlement has been reached. In April, a New Jersey Superior Court judge ruled that a $7 billion lawsuit filed by Parmalat against Citigroup could go forward on a claim that Citigroup aided and abetted former Parmalat executives in misappropriating company money. In May, Parmalat reached a €24 million settlement with its shareholders.

Full post as published by JURIST - The Paper Chase on December 19, 2008 (boomark / email).