Judge to rule on Parmalat chief

Italian prosecutors asked a judge today to confirm the arrest of Parmalat’s founder and former Chief Executive Officer after they accused him of market rigging, fraudulent bankruptcy and making false statements to auditors to hide a multi-billion pound hole in the dairy company’s balance sheet.

A judge in Milan was expected to decide on the request later today. A ruling in the prosecutors’ favour would make the detention of Calisto Tanzi a formal arrest, and allow charges to be officially levelled against him.

Tanzi was arrested late on Saturday in Milan and questioned in Milan’s San Vittore prison by prosecutors from Milan and Parma, where the company is based.

Parmalat’s shares, which have plummeted by 90% since the company acknowledged it had misrepresented its financial position earlier this month, were suspended indefinitely by the Italian Stock Exchange late on Sunday.

Parmalat’s problems emerged on December 19, when it revealed that Bank of America Corp was not holding €3.98bn of its funds, as the Italian company had reported in September.

Since then, the estimated amount of money missing from its balance sheet has ballooned, with Italian reports saying as much as €9.9bn could be missing from what may have been 15 years of false accounting.

Italian news reports said today that prosecutors believe Tanzi himself misappropriated some €810m. They quoted Tanzi as telling investigators during his closed interrogation on Sunday that at most he had taken about €427,000 for personal use.

Parma prosecutors have accused Tanzi of fraudulent bankruptcy – committing a fraud that resulted in the bankruptcy of a company, as well as false accounting. Prosecutors in Milan added to those accusations yesterday with a charge of market manipulation and making false statements to auditors.