Sun, Aug 08, 2004 - Page 11 News List

Parmalat files suit against UBS for role in its collapse

COOKING THE BOOKS The food conglomerate is being administered by the Italian government and, with old management gone, they're looking for new revenue

AP , ROME

Reeling from a massive financial scandal, dairy giant Parmalat announced a lawsuit Friday seeking US$350 million from Swiss bank UBS -- the Italian conglomerate's second attempt in as many weeks to share the blame and the losses from its fraudulent near-collapse.

Last week, Parmalat filed a US$10 billion suit against Citigroup Inc in a New Jersey court, saying it sought "recovery from third parties believed to have played a role in Parmalat's collapse."

Also Friday, Dow Jones Newswires cited an unidentified source as saying Parmalat may sue a group of banks for an additional US$1.96 billion for losses incurred last year in the run up to Parmalat's spectacular crash. Parmalat's new management argues that investment banks helped disguise the conglomerate's true finances, Dow Jones said.

Parmalat said Friday that the claim against UBS, filed in a court in its hometown of Parma, was made in connection with a transaction made in July of last year. Parmalat paid UBS huge sums of money in a complicated deal that allowed the food company to borrow money from the bank at low rates it could not find on the open market, it said.

Parmalat, which is now being run by government-appointed turnaround expert Enrico Bondi, said it was also seeking interest on the sum.

UBS denied any culpability, saying Parmalat was at fault for having falsified its financial position at the time of the deal.

The Parmalat scandal exploded in December when the conglomerate acknowledged it didn't have the US$5 billion it had claimed was in a Bank of America account.

Parmalat then went into bankruptcy protection, and prosecutors have been investigating alleged wrongdoing by numerous former members of the company's management.

UBS spokesman David Walker said Friday that the bank was reviewing the summons, but that the bank's recent history with Parmalat included only "one financing transaction."

"We believe that the transaction in question was entirely valid and therefore any effort to declare the transaction invalid will be met by a vigorous defense by UBS," Walker said.

He said Parmalat had represented itself "as a financially sound investment-grade company."

"We have absolutely no evidence that any UBS employees have done anything misleading, fraudulent or illegal in their dealings with Parmalat or were aware of the true state of Parmalat's finances," Walker said.

Investigators in Parma have focused on the company's founder and its top officials, while Milan prosecutors have been looking into the possible role of investment banks and other financial institutions, as well as accounting businesses.

Parmalat argues that its previous management wouldn't have been able to raise this money -- and thus defraud investors of more cash -- had banks such as UBS and others not structured deals that helped disguise the global dairy and food company's real financial position, Dow Jones said.

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