An Italian judge on Tuesday ordered the disgraced founder of insolvent food group Parmalat Finanziaria SpA to remain in jail as prosecutors questioned members of his family about one of Europe's biggest corporate scandals.
Calisto Tanzi, who built Parmalat into a global company employing 35,000 people, admitted on Monday that he diverted some 500 million euros (US$625 million) from the publicly-listed company into firms controlled by his family.
At the same time, he said there was a hole of about 8 billion euros (US$10 billion) in Parmalat accounts, according to a legal warrant obtained by Reuters.
ALL IN THE FAMILY
Among those quizzed on Tuesday were Tanzi's son Stefano, his brother Giovanni and his niece Paola Visconti.
Tanzi himself faced a nine-hour grilling on his third day of questioning.
With details of the balance-sheet fraud still emerging, judge Guido Salvini rejected a request by Tanzi to leave Milan's bleak San Vittore jail, where he has been held since Saturday, and be placed under house arrest instead.
Salvini said there was "a real danger of evidence being polluted" if Tanzi was allowed to go home, according to the legal warrant obtained by reporters.
"It is still not clear what was the final destination of the money that was diverted from Parmalat," Salvini wrote.
Prosecutors believe Tanzi falsified accounts at his global food empire for years and embezzled more than 800 million euros, pushing the firm into insolvency and saddling it with debts they estimate between 10 billion and 13 billion euros.
MISSING MONEY
In legal documents obtained by Reuters, Milan prosecutors at the weekend said there was a hole of "more than 7 billion euros" in Parmalat accounts.
Parmalat's crisis exploded in mid-December when a 3.95-billion-euro account held by a Cayman Islands unit was declared false.
Then prosecutors said Parmalat had not bought back 2.9 billion euros of debt as stated in company accounts, and 500 million euros invested in a Cayman Islands fund has yet to be recovered.
Judge Salvini quoted Tanzi as having told prosecutors on Monday that he believed the hole amounted to "around 8 billion euros" but gave no details of how he reached that sum.
The US Securities and Exchange Commission said on Monday it was filing suit against Parmalat seeking substantial fines, accusing the group of misleading bond investors in "one of the largest and most brazen corporate financial frauds in history."
Among some 20 people under investigation in the case are the chairman and a partner of auditing firm Grant Thornton SpA, accused by prosecutors of helping Parmalat organize a web of offshore companies that concealed the firm's losses.
Executives at Grant Thornton International's Italian affiliate, Grant Thornton SpA, have denied any wrongdoing.
No one has been charged in the case.
COOKIE MAKER
Separately, Parmalat's US cookie business, which was put up for sale several months ago, is drawing interest from potential buyers, the Wall Street Journal reported on its Web site.
In recent days, several corporate buyers and private investment firms have signed confidentiality agreements that give them access to the unit's books, the newspaper said, citing unidentified people familiar with the situation.
The business, which makes Archway brand and Mother's label cookies, may sell for about US$400 million, the newspaper said.
Possible buyers include Kraft Foods Inc, Kellogg Co, Cypress Group LLC, Hicks, Muse, Tate & Furst Inc and the private equity unit of JP Morgan Chase & Co, the Journal reported.
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