A New Jersey state court jury ruled that Citigroup did not help executives at Italian dairy Parmalat commit a massive fraud earlier this decade.
The global banking giant was sued for $1.92 billion in damages. However, lawyers for Parmalat CEO Enrico Bondi failed to prove Citi aided in the fraud, Bloomberg News reported. Rather, jurors agreed with Citi’s counterclaims that Parmalat engaged in fraud, negligent misrepresentation, and conversion. As a result, they ordered Parmalat to pay $364.2 million in damages to Citi.
Citigroup is “delighted the jury has vindicated our position,” spokeswoman Andrea Hurst told the wire service. “We have said from the beginning of this case that we have done nothing wrong. Citi was the largest victim of the Parmalat fraud and not part of it.”
Bondi’s lawyers argued that Citigroup, a banker for Parmalat from 1994 to 2003, knowingly turned its back to the looting by former CEO Calisto Tanzi and former Chief Financial Officer Fausto Tonna, according to Bloomberg.
Citi lawyers argued that its employees didn’t know about the looting and its reasonable safeguards were thwarted, the wire service added.
“Tonna and Tanzi committed a massive fraud not just on Citi, they committed it on all sorts of people, and they got away with it,” Citigroup attorney Theodore Wells reportedly said in his closing arguments last week. “They got away with it because what they did was brazen and unprecedented.”
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.
Bloomberg noted that in the trial, which began in mid-May, the jury found by a 6-1 margin that Citi did not aid and abet a breach of fiduciary duty. Rather, it agreed by the same margin on Citi’s counterclaims that Parmalat engaged in fraud, negligent misrepresentation and conversion. Jurors awarded $364.2 million on the first two claims and $210.2 million on the conversion claim. However, the judgment was capped at $364.2 million. Bloomberg said this is the fifth-largest verdict in the U.S. so far in 2008.