VideoThe $5 billion accounting scandal at Parmalat, Italy's eighth-largest industrial company, has dragged in a trio of former finance directors.
Citing a judicial source, Reuters reported that Parmalat founder Calisto Tanzi — who resigned last week as chairman and CEO — and three former finance directors, Fausto Tonna, Alberto Ferraris, and Luciano Del Soldato, are being investigated for possible false accounting, fraud, and market rigging.
Tonna served as CFO until this past March. Ferraris and Del Soldato followed him in that position at the maker of long-life milk, but only for a short time: Ferraris from March until November of this year, and Del Soldato for a little more than three weeks thereafter, until he quit on December 9, according to reports.
One of the prosecutors involved in the case, Angelo Curto, told Reuters: "The cases of false accounting are obvious.... Bonlat is just one of various balance sheet manipulations. [Its accounts] are generally not very reliable."
Yesterday CFO.com reported an announcement by Parmalat in which the New York branch of Bank of America (BOA) informed Grant Thornton, the auditor of Bonlat Financing Corp., a Cayman Islands-based Parmalat subsidiary, that it does not have an account in the name of Bonlat.
Parmalat executives said BOA denied the authenticity of a document dated March 6, 2003, that certified the existence of nearly $4.9 billion in Bonlat securities and liquidity as of December 31, 2002. Today, Reuters cited media reports predicting that this nearly $5 billion accounting hole could more than double in size.
On Saturday, Reuters added, police removed documents from the offices of Bonlat auditor Grant Thornton and Parmalat lead auditor Deloitte & Touche.
SEC Settles Enron Suit with CIBC, Executives
The Securities and Exchange Commission has settled charges with Canadian Imperial Bank of Commerce and two CIBC executives for their roles in Enron Corp.'s manipulation of its financial statements.
The commission's complaint alleged that CIBC and the executives helped Enron to mislead its investors through a series of complex structured finance transactions over a period of several years preceding Enron's bankruptcy.
CIBC agreed to pay $80 million: $37.5 million in disgorgement, a $37.5 million penalty, and $5 million in prejudgment interest. The SEC announced that it intends to direct the money to Enron fraud victims under the Fair Fund provisions of the Sarbanes-Oxley Act.
Also named in the injunctive action are Daniel Ferguson, Mark Wolf, and Ian Schottlaender.
Ferguson, executive vice president of CIBC's treasury, balance sheet, and risk management group, has agreed to pay a total of $563,000: disgorgement of $265,000, a penalty of $265,000, and prejudgment interest of $33,000. He also agreed to be banned from serving as an officer or director of a publicly traded company for five years.
Wolf, formerly a CIBC executive director based in Houston, responsible for credit management in the leveraged finance group, agreed to pay a total of $60,000: disgorgement of $27,500, a penalty of $27,500, and prejudgment interest of $5,000.
The payments from Ferguson and Wolf will also go to the Enron fraud victims.
Schottlaender, a former managing director in CIBC's corporate leveraged finance group in New York, is contesting the charges.
Credit Picture Brightening, Says Moody's
Relative to last year, the pace of downgrades has slowed significantly while the pace of upgrades is improving, reports Moody's Investors Service, which expects this trend to continue into 2004.
"Positive recent developments indicate that we have passed the inflection point," says Moody's senior credit officer William Rottino. "The job market, though still slack, is beginning to recover, while manufacturing activity is edging higher."
In fact, only the airline, aerospace, and tobacco sectors saw more downgrades of debt in 2003 than in 2002, according to Moody's.
Furthermore, the dollar volume of downgrades of North American companies stands at around $550 billion in 2003, roughly half the figure for 2002, according to Moody's. And the dollar volume of upgrades debt is $187 billion in 2003, nearly twice the volume for 2002.
"The credit environment is beginning to show more stability as a result of strength in consumer spending; a rebound in capital investment; lean inventory levels; and a rising level of business activity," points out Pamela Stumpp, a Moody's managing director.
Indeed, Moody's currently has stable and positive credit outlooks for most industries. Negative outlooks are limited to aerospace, chemicals (excluding industrial gas), drug wholesalers, electronic component distributors, information technology services, power, retail, software, and tobacco.
The outlook is positive for the defense, industrial gas, and residential homebuilding industries. "The rise in interest rates has had little effect on new home sales, and buyers appear to be accelerating plans to purchase new homes before interest rates go higher," says Moody's. The industrial gas segment is generally characterized by relatively strong and stable business performance, according to the credit rating agency.
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