Parmalat falsified books for 13 years

Parmalat, the insolvent Italian food company, falsified its earnings reports for at least 13 years, losing almost 2 billion euros (US$2.4 billion) in that period and realizing only one profitable year, according to a report prepared by an independent auditor for prosecutors in Milan.

Calisto Tanzi, Parmalat's founder and former chairman, took at least 926 million euros (US$1.1 billion) from the company from 1990 to 2002, the period covered by the report, the most comprehensive look yet at Parmalat's finances. Tanzi has admitted taking 500 million euros (US$599 million) from Parmalat, money he says he transferred to his family's unprofitable travel businesses.

The report states that Parmalat, which had reported a profit every year since 1990, probably began fabricating its earnings statements even before then, according to two people close to the investigation who read the audit.

Parmalat sought protection from creditors in December and was declared insolvent after revealing that a bank account that was supposed to hold 3.9 billion euros (US$4.7 billion) did not exist. Since then, more than 50 people, 2 former Parmalat auditors and 7 banks have been under investigation.

In a separate audit, Parmalat's new accounting firm, PricewaterhouseCoopers, said in a preliminary report that the company falsified sales and earnings for last year and understated its debt by eight times. Pricewaterhouse has not yet made public its findings for the years before last.

Parmalat and the office of the Milan magistrates declined to comment on the independent auditor's report. Stefania Chiaruttini, who wrote the report, could not be reached for comment.

In it, though, Chiaruttini said that Parmalat's debt was 110 million euros (US$131 million) in 1990. Soon after, however, the company embarked on a buying spree that transformed it into the world's largest dairy company, with business in 30 countries, including the US.

Authorities this week granted house arrest to Gian Paolo Zini. Zini's New York law firm helped set up two offshore entities that are said to have played an important role in Parmalat's fraud.

Preliminary hearings in the case will probably not begin until September. The prosecutors will seek indictments of 29 people, Bank of America and Parmalat's two former auditors, Deloitte & Touche and Grant Thornton's former Italian unit, now called Italaudit.

Preliminary hearings in Italy sometimes last more than two years.