Citigroup sued Italy on Friday, claiming that the government appointee who runs the bankrupt Parmalat would unfairly pay only 2 million euros (US$2.48 million) of Citigroup's claim of a 538 million euro debt.
In legal proceedings begun on Friday in a Rome administrative court, Citigroup said that the Italian government, which has approval power over Parmalat's restructuring plan, has not ensured that the debt claims of Citigroup and other financial institutions are fairly evaluated.
"The proposed rejection of our claims in the Parmalat bankruptcy is unfair, entirely without basis and in our view contrary to the law," William Mills, head of Citigroup corporate and investment banking in Europe, the Middle East and Africa, said in a statement.
"As Parmalat's largest creditor and a victim of this fraud, Citigroup will pursue all opportunities for appropriate redress of its losses," Mills said. "The law requires that all creditors be treated equally during bankruptcy proceedings, and instead the rights of creditors have been trampled upon repeatedly."
Enrico Bondi, Parmalat's government-appointed administrator, has rejected almost all the debt claims of Citigroup and of Bank of America, the other US bank that worked for Parmalat in the years up to the company's collapse in December. Bondi has recommended paying only 2 million euros of Citigroup's debt claims.
A judge in Parma, where Parmalat is based, has until Nov. 18 to rule on Bondi's recommendations on the debt claims. Citigroup did not specify how much of its claim it is seeking. In any case, the sum would be reduced, given that Parmalat is in bankruptcy.
Friday's suit comes about three months after Parmalat sued Citigroup to recover damages roughly estimated at US$10 billion. Parmalat is contending that the investment bank knowingly helped create complex transactions that misled shareholders and cost them billions of dollars. Citigroup has defended its business dealings with Parmalat and denied any wrongdoing.
Friday's court proceedings capped a week rich in legal proceedings involving Parmalat. On Thursday, Parmalat filed suit against Bank of America in a US court, and on Wednesday Banca Intesa of Italy agreed to pay Parmalat 160 million euros to settle their dispute out of court. Parmalat has lawsuits pending against several other of its former bankers as well as two former auditors.
When it sought protection from creditors in December, Parmalat had 14.8 billion euros in debt: 9.4 billion euros in bonds, 4.2 billion euros owed to banks and 1.2 billion euros in other types of debt. An independent audit later showed that Parmalat's former executives had falsified financial statements for more than a decade.
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