Accounting & Tax

Got Bilked?

A new indictment of Parmalat's former CFO and CEO could give bondholders the chance to seek billions in damages.
Stephen TaubJuly 25, 2007

The former CFO and CEO of Parmalat were among nearly two dozen individuals indicted Wednesday by an Italian judge for their role in Europe’s largest corporate bankruptcy, according to the Associated Press.

Fausto Tonna, the former finance executive, founder Calisto Tanzi and other former company executives were charged with fraudulent bankruptcy and criminal association, according to the report. The defendants each face up to 15 years in prison, according to the AP.

The wire service noted that the judge’s decision to indict the individuals could heavily impact bondholders. If the executives are found guilty, the bondholders could seek billions of dollars in damages, it explained.

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Last year, Tonna reportedly said: “The fact of hiding the losses was Calisto Tanzi’s decision,” said. “It was certainly also known to people on the board of directors.” The need to adjust earnings began around 1994 or 1995, he reportedly added, “when the situation with our activities in South America became disastrous.”

The AP pointed out that Tanzi has repeatedly insisted that the banks caused the company’s collapse, since they were promoting the bond sales.

In 2005, Tonna was one of 11 individuals — including two other ex-CFOs — who were sentenced in a different case; they were charged with market rigging, providing false accounting information and misleading Italy’s stock market regulator. Following a plea bargain, Tonna was sentenced to two and a half years in prison.

Last month, four banking giants were indicted in Milan for their role in Parmalat’s failure. Citigroup Inc., UBS AG, Deutsche Bank AG and Morgan Stanley, as well as 13 managers, were charged with failure to take measures that would have prevented the crimes that led to the company’s failure, according to the report.