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Ex-chief of Italian dairy empire goes on trial

PARMA, Italy (AP) — The trial on the most serious criminal charges in the multibillion-dollar failure of the Parmalat dairy empire opened Friday, more than four years after the company acknowledged a crushing debt that would lead to Europe’s biggest corporate bankruptcy.

Parmalat founder Calisto Tanzi and his one-time right-hand man and former CFO Fausto Tonna are among 24 former executives who face charges including fraudulent bankruptcy and criminal association. The charges carry a maximum 15 years in prison, the most severe penalties in any of the series of trials in Milan and Parma.

The court also opened four related trials, including on Parmalat’s acquisition of the Ciapazzi mineral water firm and the failure of Parmalat’s travel company Parmatours, raising the total number of defendants to 56 — including the well-known Italian bankers Cesare Geronzi and Matteo Arpe.

After the trials opened, defense teams argued for the trials be combined, a move that lawyers for the victims said would only further complicate proceedings.

The two-year investigation and subsequent proceedings have generated 6 million of pages of documents and complaints from local public employees unions that not enough manpower has been provided to handle the information flow. The final names of the three-judge panel were only announced on Thursday, the eve of the trial.

The trial itself promises to be the largest in Italian judicial history. It is expected to last up to three years and is opening nearly eight months after the indictments were handed down following a yearlong preliminary hearing — during which some two-thirds of the original defendants reached plea deals.

Neither Tanzi nor Tonna appeared on the first day of the trial, which was being devoted to procedural matters. Italian law does not require defendants to attend their trials.

Tanzi has apologized to the bondholders, which obviously is insufficient. The only thing he can do, as the one who was running Parmalat, is to create a situation in which all who are responsible must answer for their conduct, defense lawyer Giampiero Biancolella said as he arrived in court.

Tanzi will actively participate in the trial once it gets going, he said.

But it seemed unlikely that the trial would answer the big question: What happened to all the money from the 200,000 investors who lost their capital?

Giving a face to the fraud, a few bondholders — most of whom were ordinary Italians who considered the bonds a safe investment for their savings — attended the opening day.

Valseno Giovanatti, a 73-year-old retired laborer, invested 60,000 euros of his savings from four decades working abroad in Switzerland in Parmalat bonds.

Parmalat was an everyday staple. I didn’t go after luxury, it was a good company. We didn’t know about the mess, Giovanatti said. I bought bonds because they were secure. We are nearly 200,000 who lost money. We’re not all speculators.

Parmalat’s financial web unraveled in late 2003 when it acknowledged a debt of 14 billion euros (then worth about $18 billion), eight times higher than previously claimed.

Parmalat emerged from bankruptcy in 2005, and has refocused on its core dairy business. Its finances have been helped by the efforts of chief executive Enrico Bondi, who to date has recouped 1.3 billion euros ($2 billion) from banks in settlements.

Prosecutors have submitted a list of 247 witnesses, while Tanzi’s defense list numbers 35,000 — the overwhelming majority of the small bondholders who lost their savings in the crash and who have joined the trial as civil complainants seeking damages.

This is not a provocation but a necessity, defense lawyer Giampiero Biancolella said. We would like to ask these witnesses why they bought the Parmalat bonds, to understand if they were persuaded by Parmalat’s accounts or if someone else convinced them to buy.

Tanzi’s defense has argued in various trials that it was the financial institutions selling the bonds that were responsible for the fraud.

Trials like the one opening Friday are the best chance for the small bondholders to get back some of their lost investment; about 50,000 accepted shares in the new Parmalat at half the value of their investment. Under the Italian system, civil complainants join the trial and may seek civil damages once verdicts have been reached in the criminal case.

Other trials are under way in Milan, where Italy’s stock exchange is located, focusing on market aspects. In one case, Tanzi and others, including external auditors, face charges of market rigging, false accounting and misleading Italy’s stock market regulator. They face up to five years in prison if convicted.

Also in Milan, a trial opened earlier this year against four international banks on charges of failing to have procedures in place that would have prevented the alleged fraud. The banks have denied wrongdoing.

The Parmalat failure is also the subject of civil cases in the United States.
Ex-chief of Italian dairy empire goes on trial – found here.


March 14, 2008 - Posted by | Uncategorized

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