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Wed, Dec 24, 2003 - Page 12 News List

Parmalat founder investigated

EUROPE'S ENRON As the new chief executive officer mulls bankruptcy protection, prosecutors began probing former company members over holes in the accounts

REUTERS , MILAN

A four-billion euro (US$5 billion) accounting scandal at Italy's Parmalat snowballed on Monday as the food group's founder and two former finance directors became targets of a criminal probe.

Parmalat's new chairman and chief executive Enrico Bondi was considering bankruptcy protection options while politicians mulled bailing out Italy's eighth-largest industrial concern in a case that many are calling "Europe's Enron."

Following Friday's shock revelation of a huge accounting hole at the company, which media reports said could widen to 10 billion euros, a judicial source said Parmalat's founder Calisto Tanzi had been put under investigation, a week after he stepped down as chairman and CEO.

Prosecutors also named two former finance directors, Alberto Ferraris and Luciano Del Soldato, in their probe into possible false accounting, fraud and market rigging at Italy's biggest food group, judicial sources said.

Parmalat, with 35,000 employees in 30 countries, stunned markets on Friday when it said a document showing 3.95 billion euros held by Cayman Islands unit Bonlat Financing Corp had been declared false by Bank of America.

Ferraris was Parmalat CFO from March until November, when he was replaced by Del Soldato -- who held the post for just over three weeks before he quit on Dec. 9.

The missing 4 billion euros dwarfs a 1 billion-euro accounting scandal at Dutch retailer Ahold and drew comparisons with the collapse of energy giant Enron.

Media reports said the hole could be as big as 10 billion euros, making it one of Europe's biggest accounting scandals.

As the investigation gathered steam, Bondi was due to meet Italy's industry minister in Rome, after Prime Minister Silvio Berlusconi vowed his government would save operations and jobs at Parmalat.

The Industry Ministry might be required to name administrators for Parmalat, depending on what type of special administration status Italy's biggest food group seeks.

Italy's Cabinet was expected to discuss the crisis yesterday, when Parmalat's board was also due to meet.

One of the prosecutors involved in the case, Angelo Curto, said: "The cases of false accounting are obvious ... Bonlat is just one of various balance sheet manipulations. [Its accounts] are generally not very reliable."

Parmalat officials were not available for comment.

On Saturday, police took documents from Bonlat auditor Grant Thornton and Parmalat's main auditor Deloitte & Touche.

Bondi's rescue team was locked in talks with bankers and legal advisers on Monday on how to keep the group afloat.

"Bondi wants to have as much flexibility as possible for what needs to be done to the business," said a source close to the matter. "He and his team are likely to keep on working all through Monday."

Agriculture Minister Gianni Alemanno said he would propose an inter-ministerial group to find ways of helping Parmalat.

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