Parmalat boss 'knew of fraud'

Italian prosecutors looking into the near collapse of food giant Parmalat claim the company’s founder was fully aware of multi-billion euro fraud at his company, and urged a judge to keep the one-time business baron behind bars during investigations.

After revelations of a multi-billion euro hole in the company’s balance sheet, Parmalat entered bankruptcy protection last week and founder and former chief executive officer Calisto Tanzi left the country.

He returned on Saturday, and police promptly detained him.

Legal officials questioned Tanzi in Milan’s San Vittore prison yesterday, while a judge considered whether to grant him house arrest or keep him in jail.

Italian news agencies said that Tanzi acknowledged during questioning that €510m had been diverted from the company over seven or eight years, but insisted that illicit acts had been carried by top financial managers on their own initiative.

Tanzi’s lawyers maintained that the 65-year-old was in poor health and posed no flight risk. “He’s a man who’s had a heart attack and wears a pacemaker, and who needs to be treated,” attorney Michele Ributti told reporters afterward.

Judge Guido Salvini in Milan was expected to issue a decision today.

The US Securities and Exchange Commission filed suit in New York against the company, alleging that Parmalat “engaged in one of the largest and most brazen corporate financial frauds in history”.

The suit says Parmalat officials sold nearly €1.4bn in bonds and notes to US investors and misled them by “grossly overstating the amount of the liquid assets” in its financial statements.

Parmalat’s problems emerged on December 19, when it revealed that Bank of America Corporation was not holding about €4.3bn 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.

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