Risk Management

Parmalat Suits Target Deloitte, Grant

Looking to milk more from the Italian dairy's accounting scandal, investors also eye Citi and Bank of America, as well as the two auditors.
Stephen TaubJune 17, 2008

In another round of lawsuits stemming from the Parmalat accounting scandal, individual investors claiming losses from the Italian dairy giant’s 2003 collapse plan to sue Deloitte & Touche and Grant Thornton, along with Citigroup and Bank of America.

The plaintiffs will probably demand more than $77 million in damages in litigation filed in Milan, according to a Reuters report quoting Vincenzo Somma, head of legal and economic studies at Altroconsumo, an independent consumer protection association. A majority of the more than 6,000 retail investors are Italian, but they will be joined in the suit by a number of European institutional investors based outside Italy, according to the report, citing Somma.

A spokeswoman for Deloitte told CFO.com that the accountancy would decline comment on the story because a suit hadn’t yet been filed. A spokesman for Grant Thornton said, “Grant Thornton LLP had no involvement whatsoever in the audit of Parmalat and did not issue any statements or audit opinions on
Parmalat’s financial statements. We have no responsibility for the
alleged actions and if a suit has been, or is later filed by these
plaintiff’s against us, it would be frivolous and merely a search for deep pockets.

Said a spokesman for Bank of America, “Bank of America believed we were dealing with an honest and profitable company. We had no knowledge of Parmalat’s fraud.” And a spokeswoman for Citi told CFO.com, “Citi was the largest victim of Parmalat’s fraud, and denies any wrongdoing in its relationship with Parmalat.”

The lawsuit would be the latest among a raft cases brought both in Italy and the U.S. Just last week, Credit Suisse Group and UBS AG agreed to pay $548 million to settle a lawsuit brought by Parmalat CEO Enrico Bondi. He had sued dozens of Parmalat’s former lenders, alleging they helped hide the true state of the company’s finances from investors, according to Reuters. The company launched a series of lawsuits seeking billions of dollars against banks in an attempt to share the blame for the collapse and recoup losses for Parmalat and investors.

Parmalat, known in the U.S. for its long-shelf-life milk products, filed for bankruptcy on Christmas Eve of 2003. Its collapse was one of the worst financial scandals involving a European company in recent memory and ultimately represented a loss of about $18 billion.

Last month Parmalat SpA itself announced that it had settled a securities class action with investors, and would distribute 10.5 million shares of stock, worth just under $40 million at the time. The company also agreed to pay up to $1.55 million as the cost of notifying the class members of the settlement.