Parmalat boss jailed on $1b fraud charges

PARMALAT Finanziaria SpA founder Calisto Tanzi is being probed for allegedly misappropriating about €800 million ($1 billion) from the company, a person familiar with the investigation said.

Prosecutors in Milan and Parma, where Italy’s biggest food company filed for bankruptcy, are seeking to keep Tanzi, 65, in jail on suspicion of committing fraud, said the person, who asked not to be named. Police arrested Tanzi Saturday evening in Milan and he is being detained in the city’s San Vittore Jail.

A request by prosecutors to keep Tanzi in custody will be reviewed by a Milan magistrate at 4pm. Gian Guido Oliva, a spokesman for Parmalat, declined to comment. “No money disappeared,” Michele Ributti, one of Tanzi’s lawyers, told reporters late yesterday. He didn’t immediately return phone calls seeking comment.

Parmalat, which sells milk products, desserts and fruit juices in 30 countries, was declared insolvent Saturday by a Parma court. The company has been unable to account for about €9 billion, people familiar with the probe have said.

“There appears to be a huge amount of money unaccounted for, together with a healthy industrial business,” said Lucio Lamberti, who helps manage €500 million at Commerzbank SGR in Rome. His funds hold Parmalat shares.

Ributti told reporters today outside the San Vittore jail that Tanzi was asked by investigators yesterday if he “was a victim”.

The attorney said Tanzi replied: “There are no victims”. Tanzi ordered the falsification of documents to cover up the company’s losses and the destruction of documents and computer files at the beginning of December, Corriere della Sera said, citing testimony by a former executive.

The former chairman of Parmalat met with his successor, Enrico Bondi, in Milan before his arrest Saturday evening, according to a person familiar with the company. On Dec 23, Prime Minister Silvio Berlusconi’s government named Bondi, a turnaround specialist, as special commissioner to restructure the company.

Umberto Tracanella, a Parmalat director, was also at the 45-minute meeting Saturday, said the person, who asked not to be named. He didn’t elaborate.

Tanzi and three of Parmalat’s former chief financial officers, including Fausto Tonna who quit Dec 10, have been questioned by investigators. Tanzi is the only former company executive who has been jailed.

Italy may ask for EU approval to help Parmalat once it has gotten the insolvent Italian dairy company’s restructuring plan, EU Affairs Minister Rocco Buttiglione said in a telephone interview.

“We are well aware we must act under market conditions and that we must not finance activities that can’t hold their own on the market,” Buttiglione said.

Parmalat shares were suspended indefinitely today, the Italian Exchange said. The stock plunged 63% on Dec 23 to €0.11, giving it a value of €89.7 million. Parmalat shares were worth €2.19 a month ago.