Parmalat steps up compensation drive

By Neil Merrett

- Last updated on GMT

Related tags: Parmalat, Law, Bank of america

Parmalat has stepped up legal proceedings against banks alleged to
have failed to prevent its 2003 financial collapse as it continues
its drive to re-establish itself as a leading global dairy company.

Parmalat's lawyers last week submitted papers to a Milan court, alleging that a number of banks linked to the company had in some cases profited from its bankruptcy, according to a report in the Financial Times newspaper on Saturday. The accusations come as the group, reformed under a new management structure, continues to seek billions of euros in compensation to help the company begin solidifying its recovery as one of the world's largest dairy processors. On Friday, Bank of America confirmed it had become the latest financial institution to face legal action over alleged involvement in failing to safeguard against the company's collapse. In a statement e-mailed to media outlets, Bank of America stressed that the charges against it were administrative and not criminal. It also claimed it had no knowledge of the company's problems at the time and was confident that it had not violated any of its procedures, adding that Parmalat's claims were "unfounded"​. However, the week was not without its troubles for Parmalat itself, as a US district court in Manhattan ruled that in accordance with Italian law, the restructured company was responsible for the liabilities of the previous administration. Claims by shareholders that they should be compensated for money lost through the accounting scandal during the previous management's tenure were upheld by the court. "According to the district court, Parmalat S.p.A. (Assumptor) has stepped into the shoes of Parmalat S.p.A. in Extraordinary Administration as its successor and, as such, has allegedly assumed, besides the assets, 'all debt',"​ the company stated in a press release.​ Parmalat said it would appeal the decision, which also must be enforced in Italy, if the claimants are to be successful. Despite the setbacks of the US court judgement, Parmalat has recently continued to grow in a spectacular reversal of fortunes. Under its feted chief executive Enrico Bondi, the company has followed a strategy to recoup the billions it lost in the financial scandal and throughout two years under court-appointed administration. The group has already reached settlements with a number of European financial institutions in its ongoing fight to recoup the billions lost in 2003, when the company defaulted on more than €14bn in debt. With Bondi at the helm, Parmalat has worked to stave off efforts by an Italian banking conglomerate to disintegrate the group, and has initiated various legal proceedings in Europe and the US against banks allegedly involved in the fraud. Bondi's argument remains that a number of financial institutions knew about the fraud and were partly responsible. However, the financial institutions involved in the 2003 affair have largely maintained that they were fooled by Parmalat's accounting chiefs. The situation is not likely to improve for companies involved with the company though, as further action against Citigroup, UBS, Deutsche Bank and Morgan Stanley were announced by an Italian judge last month. All four groups deny responsibility. Outside of the legal action, the group continued to restructure its operations by last week offloading its Pomi, Pomito and Pais brands to Boschi Food & Beverage for €2.3m.

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