Parmalat
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Parmalat SpA (ISEQ: [IT0003826473]
History
In 1961, Calisto Tanzi, a 22-year old college dropout, opened a small pasteurisation plant in Parma, Italy. Four decades later the company had grown into a multinational corporation diversifying into milk, dairy, beverage, bakery, and other product lines in the 1980s, becoming listed on the Milan stock exchange in 1990, and expanding further in the 1990's.Runaway expansion
The post-listing expansions include:- Expansion into thirty countries from six in 1990
- Parma A.C.
- * Tanzi's son Stefano, president and Parmalat board member
- ParmaTour - travel group (bankrupt, sold)
- * Francesca - chief executive
- TV network, Odeon TV (sold)
Financial fraud
At the end of 2003, one of the biggest corporate scandals in history came to light as an € 8 billion hole was discovered in Parmalat's accounting records.In 1999, Parmalat set up a subsidiary in the Cayman Islands called Bonlat. The first indication of financial problems came in early 2003 as the company tried to sell €500 million in bonds. After this CFO Fausto Tonna resigned in March and was replaced by Alberto Ferraris.
The crisis became public in November when questions were raised about transactions with mutual fund Epicurum, another Cayman-based company linked to Parmalat causing its stock to plummet. Ferraris resigned less than a week later and was replaced by Luciano Del Soldato.
In December, Del Soldato resigned, unable to get cash from Epicurum fund, needed to pay debts and make bond payments. Enrico Bondi was called in to help the company. Tanzi himself resigned as chairman and CEO. Parmalat's bank, Bank of America, then released a document showing €3.95 billion in Bonlat's bank account as a forgery. Prime Minister Silvio Berlusconi initiated a fraud investigation and appointed Bondi to administer the company's rescue.
Tanzi, once a symbol of unlimited success, was detained hours after the firm was declared officially insolvent and eventually charged with financial fraud and money laundering. Italians were shocked that such a vast and established empire could crumble so quickly. Among the questionable accounting practices used by Parmalat: it sold itself credit linked notes, in effect placing a bet on its own credit worthiness in order to conjure up an asset out of thin air.
After his arrest, Tanzi reportedly admitted during questioning at Milan's San Vittore prison, that he diverted funds from Parmalat into Parmatour and elsewhere. The family football and tourism enterprises were financial disasters; as well as Tanzi's attempt to rival Berlusconi (another rags-to-riches Italian success story) by buying Odeon TV, only to sell it at a loss of about €45 million.
See also
External links
- [Parmalat International Website]
- [BBC "Parmalat in Bankruptcy Protection"] December 24, 2003
- [Parmalat dream goes sour]; The Observer; January 4, 2004
- [How It All Went So Sour - The inside story of Parmalat]; Time Magazine; November 23, 2004.
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