Word: parmalat
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This was the first revelation in the scandal that turned Parmalat into Europe's Enron, a morass of fraud and financial failure made all the more dramatic by the fact that the company had established itself as a recognized global brand. In the past year three teams of forensic accountants have combed through the company's books, and dozens of executives have made detailed confessions to magistrates in Parma and Milan. Using documents obtained by TIME, it's possible to piece together the inside story of how the company that wanted to be the Coca-Cola of milk went sour...
...international auditors and banks that were working for Parmalat vehemently reject the allegations, saying they were tricked by Parmalat's management. (U.S. ambassador to Rome Mel Sembler has been lobbying on behalf of the U.S. banks, alleging that they are being discriminated against in the bankruptcy proceedings and warning of damage to bilateral relations.) Bank of America notes that it has been a victim in the case, already writing off $425 million. Citibank puts its total Parmalat exposure at $540 million. Where did the rest of the lost billions go? According to Bondi, $8.5 billion went to pay interest, dividends...
...understand how the foreign financial institutions got so deeply involved with Parmalat, it's important to appreciate the hype surrounding the company a decade ago. During the 1990s, it was one of the hottest firms in Italy. Tanzi, 66, was a legendary figure, revered for building a world-class company from scratch through hard work and innovation. Soon after founding Parmalat as a dairy company in 1961, he embraced a new pasteurization technology that allowed milk to stay fresh for months without refrigeration. He discovered the power of sports marketing and plastered the Parmalat name on events ranging from World...
...years Tanzi hid his company's difficulties by expanding. Following a disastrous foray into television in the 1980s, he staved off bankruptcy by engineering a reverse merger with a dormant holding company listed on the Milan stock exchange and followed up with a big capital increase. That enabled Parmalat to go public in 1990 and plug some of the gaps in its accounts. As early as 1993, according to evidence given to magistrates in Parma, Parmalat allegedly began to play fast and loose with its balance sheet. Starting in 1992, the group began buying up dairy and other companies...
...company seemed so attractive that foreign banks, with Citibank at the head of the line, were clamoring to get a piece of the business. Ferraris, who worked at Citibank in Milan for seven years before joining Parmalat in 1997 as an executive in Canada and Australia, remembers making regular sales calls on CFO Tonna. "There was big competition for Parmalat business," Ferraris recalls. "You needed to come up with a product that really interested them." On Ferraris' watch, Citibank scored two coups, first setting up a securitization program, then advising Parmalat on its acquisition of Beatrice Foods in Canada...