Parmalat, Parmalat: The Big Double-Bill

Duplicate invoices reportedly backed about $5 billion in loans.
Stephen TaubFebruary 4, 2004

Parmalat Finanziaria SpA apparently received about $5 billion of loans from banks last year by allegedly double-billing for its dairy products, according to Bloomberg, citing court documents and people familiar with the company’s financing.

Parmalat issued invoices to its 33 distributors and to hundreds of Italian supermarkets for the same goods, reported the wire service, then used the invoices to gain credit from about 40 Italian banks.

In addition, Parmalat obtained more than $300 million of funding from Citigroup backed by supermarket billings, said the wire service, citing testimony by Marco Ghiringhelli, an auditor for PricewaterhouseCoopers, to prosecutors.

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Parmalat was declared insolvent in December after it disclosed that a $4.9 billion bank account didn’t exist; its total debt as of last September was $17.6 billion. Of the $5 billion in loans allegedly connected to the double-billing, adds Bloomberg, about one-quarter would be due in April if the company were not protected from creditors.

Meanwhile, banks aren’t the only ones that apparently lost money in Parmalat. Global insurance giant Aflac said it recorded a pretax loss of $257 million from the sale of its holdings in the disgraced Italian company, It also sold its investment in Levi Strauss at a pretax loss of $38 million.