Banks knew of problems, says Parmalat founder

By Anthony Fletcher

- Last updated on GMT

Related tags: Parmalat, Bank of america

International banks supporting Parmalat's operations knew of the
company's financial problems, according to the former chairman
Calisto Tanzi.

Facing charges of false accounting and manipulating share prices in Europe's biggest case of corporate fraud, Tanzi told the court Milan that Parmalat and its financial backers knew that the accounts, which covered a gaping 14 billion hole, were not in line with reality.

In his statement, Tanzi specifically named Bank of America over its involvement in placing Parmalat bonds. The banks have consistently denied any wrongdoing in Parmalat's collapse.

Last week, Parmalat's chief executive Enrico Bondi also pointed the finger at the company's creditors. Testifying at Tanzi's trial, he said that he had the impression that the company had been protected by its creditors while it plunged headfirst into financial disaster.

Parmalat went into administration in December 2003 following the revelation that a key account with Bank of America did not exist. Holes in the firm's accounts hid the fact that the company was a whopping 14 billion in debt.

Since then, Milan magistrates have been investigating suspected financial crimes associated with the scandal.

At his trial this week, Tanzi also expressed remorse over the 14 billion scandal that engulfed the disgraced dairy giant in 2003 and affected thousands of small investors.

He claimed that he wasn't trying to evade his responsibilities in the collapse and had full awareness of the company's operations.

Although the disgraced Tanzi is attracting all the headlines, it is Bondi who is central to the dairy firms ongoing resurgence. He was appointed by the government to rescue the company after the fraud was exposed in 2003, and was elected chief executive in autumn last year.

Bondi has already claimed 8.07 billion in damages in lawsuits filed against the group's auditors and banks. Parmalat has also sued banks JPMorgan Chase and Unicredito Italiano for 4.4 billion for their roles in the sale of Parmalat bonds issued from 1997 through 2001.

Financial institutions however have maintained that they were fooled by Parmalat's fraud. The foreign banks implicated so far include Citigroup and Morgan Stanley, Germany's Deutsche Bank and Swiss bank UBS.

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