Parmalat founder Calisto Tanzi was sentenced on Thursday to 10 years in prison over a 14-billion euro (US$20 billion) fraud scandal in 2003 that caused Europe’s largest corporate bankruptcy to date.
The 70-year-old, who turned a modest pasteurized milk company into a leading food manufacturer and symbol of Italy’s post-World War II prosperity, is the first executive to be sent to prison for his part in the firm’s collapse.
The sentence — less than the 13 years demanded on Monday by prosecutors — was handed down by a tribunal in Milan, the ANSA news agency reported.
Tanzi, also the former chief executive of the Italian food giant, stood accused of manipulating the company’s share price, assisting in false accounting and hindering audits.
Dubbed “Europe’s Enron,” the Parmalat affair erupted in late 2003 when more than 14 billion euros went missing from the group’s accounts.
The demise of the food conglomerate, which employed 36,000 in 30 countries, wiped out the savings of around 135,000 people in Italy.
The Parmalat collapse spawned a series of trials in which several defendants, including Tanzi’s adult children Francesca and Stefano, have already negotiated lighter prison terms.
The court in Milan acquitted on Thursday seven other suspects in the case, three of whom worked for Bank of America, and fixed prison terms of between two months and five months and 10 days for a further 10 accused.
Italaudit, Parmalat’s former auditor, an ex-Grant Thornton partner, was ordered to pay a fine of 240,000 euros and had a further 455,000 euros confiscated.
Bank of America welcomed the ruling clearing its employees of any wrongdoing in the case and proving “that the Parmalat fraud was perpetrated solely by the Parmalat insiders with the active assistance of its auditors,” it said.
“As the evidence demonstrated, no one at Bank of America knew or could have discovered the true financial condition of Parmalat,” the bank said in a statement.
The trial, which began in September 2005, was the first opened into the collapse of the food giant.
One of the three prosecutors, Francesco Greco, likened the case to “an ugly mafia scandal.”
A second trial in Milan opened in January this year with three foreign banks — Citigroup, Morgan Stanley and Germany’s Deutsche Bank — and several employees accused of price manipulation and disseminating false financial information.
The third and largest trial linked to the company’s collapse in terms of number of suspects and sentences only started last March in the northern city of Parma, site of the company’s headquarters.
The trial involves 55 defendants, including Tanzi, his brother Giovanni Tanzi, chief financial officer Fausto Tonna and several bankers, on charges of bankruptcy fraud and criminal association.
Both the prosecution and Tanzi’s lawyers accused the banks of having sold Parmalat shares so that they could safeguard their own investments in the group, fully aware of its insolvency.
Parmalat had demanded 7.1 billion euros in damages and interest from Credit Suisse and 2 billion dollars from UBS, but in June this year Swiss banks agreed to pay 357.5 million euros in settlements.
In October a jury in the US state of New Jersey dismissed a claim by Parmalat that Citigroup helped executives at the food group drive it to bankruptcy in 2003 through fraud and theft.
The US jury also ordered Parmalat to pay US$364.2 million to Citigroup, which had demanded damages and interest.
The sum was to be paid in shares, which gave the US bank a 1.13 percent stake in Parmalat.
The Parmalat affair was a landmark case owing to the scale of the fraud and because it shook the world of Italian finance, highlighted failings in accounting regulations and besmirched prestigious names in international banking and accounting.
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