Berlusconi vows to save Parmalat

ITALIAN Prime Minister Silvio Berlusconi has said his government will save food group Parmalat, which has revealed a €4 billion hole in its accounts in a scandal reminiscent of the bankruptcy of Enron.

As prosecutors launched a fraud investigation, a new emergency management team at the global dairy firm was working on a rescue plan which an industry source said would include a request for protection from creditors.

Mr Berlusconi told reporters the Economy Ministry was working on plans to “preserve the industrial part of Parmalat which...is part of the country’s wealth”.

Parmalat is one of Italy’s best known brand names and has nearly 35,000 employees in 30 countries with annual revenues of more than €7.5bn.

However, concerns about apparently risky financial investments turned into outright panic on Friday when it announced that a document showing €3.95bn held by a Cayman Islands unit had been declared false by the Bank of America.

The news, described by Mr Berlusconi as “almost incredible“, raised the prospect that Parmalat might file for bankruptcy.

Parmalat said late on Friday it was still looking for “the plan of action most suited to the current situation”.

Under Italian bankruptcy law Parmalat could be placed under “controlled administration”, which would give it up to two years of protection from creditors while attempting a turnaround.

The industrial source said Parmalat could send its request for controlled administration to a court as early as Monday.

Mr Berlusconi, speaking at an end-of-year news conference, said Parmalat might be discussed at a cabinet meeting on Tuesday.

The missing €4bn dwarfs a €1bn accounting scandal at Dutch retailer Ahold this year.

Comparisons were also drawn with the spectacular fall into bankruptcy of US energy trading group Enron two years ago amid accounting irregularities.

In Milan, judicial sources said investigators probing Parmalat were considering possible charges that included providing false information to auditors and fraud.

Police searched the Milan offices of auditors Grant Thornton, the firm that certified the 2002 accounts of Parmalat’s unit in the Cayman Islands, and of Deloitte & Touche, auditors of the Parmalat group accounts, justice sources said.

Grant Thornton, in a statement, confirmed the search and said it had handed over all documents relating to its work with the Cayman Islands firm. It also defended its audit and called on the prosecutors to establish who produced the false document.

Parmalat’s battered shares slumped a further 66% last Friday, giving the firm barely a tenth of the stock market value it had just more than a week ago.

Parmalat said newly installed chairman and chief executive Enrico Bondi would ask justice authorities to consider possible criminal action, but it did not say against whom action might be taken. The judicial sources in Milan said no one had yet been identified as a possible target for their probe.