MILAN, 26 December 2003 — Parmalat’s troubles deepened yesterday after six foreign creditor companies lodged a lawsuit against the global food group, which is caught up in one of Europe’s biggest business scandals.
Hours after the company filed for bankruptcy protection in Italy, a group of foreign life insurers holding unpaid bonds sued to win control of two Parmalat units in the Cayman Islands.
The suit was the first publicly announced move by Parmalat creditors to recover billions of euros of investments jeopardized by an Enron-like crisis at Parmalat that has thrown a spotlight on some of the world’s biggest banks and auditors.
Public prosecutors are investigating for fraud at Italy’s eighth-biggest industrial group after a hole which could exceed 10 billion euros ($12.44 billion) was found in its accounts - a “shameful disaster”, according to Agriculture Minister Gianni Alemanno.
Some 20 people including Parmalat’s founder and former Chief Executive Calisto Tanzi are under investigation for fraud, false accounting and market rigging.
Investigators sought to interrogate Tanzi on Wednesday but discovered he had left Italy for an undisclosed location.
A judicial source said Tanzi was willing to return to Italy to face questioning, but his absence complicated efforts to find out quickly how at least seven billion euros went missing from the dairy group’s books.
Those interrogated so far, including three former chief financial officers, have told investigators of a complex web of offshore shell companies masking billions of euros of losses and overseen by senior company officials, judicial sources have said.
Police on Wednesday searched Tanzi’s house in Collecchio, the northern Italian town where Parmalat has its headquarters, and sealed off the offices of La Coloniale, the Tanzi family’s holding firm that controls the group.
Starting with a pasteurization plant near Parma, Italy’s gastronomical capital, in 1961, Tanzi, 65, built Parmalat into a global food group via a string of acquisitions in what for many years was one of Italy’s biggest corporate success stories.
The group, whose juices, biscuits and long-life cartons of milk line shelves from Brazil to Australia, has nearly 35,000 employees in 30 countries.
Late on Wednesday, six insurers said they had asked the Grand Court of the Cayman Islands to liquidate two Parmalat offshore units, Food Holdings and Dairy Holdings.
The creditors - Jefferson-Pilot Life Insurance Co., Monumental Life Insurance Co, New York Life Insurance and Annuity Corp., Principal Life Insurance Co., Transamerica Occidental Life Insurance Co. and Transamerica Life Insurance Co. - said they wanted control of the units after Parmalat failed to repay bonds due this month.
Parmalat officials were not available for comment. Parmalat on Wednesday filed for protection from creditors under a new, fast-track procedure, pushed into law by the government of Prime Minister Silvio Berlusconi in an attempt to save the country’s biggest food group.
The government has appointed Enrico Bondi, a veteran rescue expert who was named Parmalat’s new CEO just 10 days ago, as commissioner charged with drafting a turnaround plan.
Shielded from creditors by the new decree, Bondi has up to two years to restructure the group. But it was not clear whether the decree would protect Parmalat’s complex offshore interests from creditors eager to be repaid.
Some experts have said North American creditors may force Parmalat to file for Chapter 11 bankruptcy protection in the United States as it could better protect their interests.
The companies that brought the suit in the Cayman Islands said they did not want to hamper Parmalat’s efforts to save its business and were willing to cooperate with the firm.
But the suit puts more pressure on Bondi, who sources said was keen to take into account the interests of creditors as well as employees and suppliers.
Parmalat had a stock market capitalization of 1.8 billion euros before the crisis broke, but its shares are now almost worthless. Bonds were recently traded at about one fifth of their face value.
