Parmalat Finanziara, the Italian dairy and food giant, is fast joining Enron and WorldCom as a household name for corporate scandal. The alleged financial fraud at Parmalat spans more than a decade and involves sums whose estimates have ballooned from EUR 4 billion to more than EUR 8 billion. Founder, chairman, and chief executive Calisto Tanzi has been ousted from the company and board and is under arrest. Enrico Bondi, who replaced Tanzi in December, has been given new authority to act as sole administrator of Parmalat.
He has 180 days to save what he can of the company. Parmalat declare insolvent because of it size and the involvement of the company with Special Purpose Entities. Calisto tanzi is founder of Parmalat that kept effective control of the company Parmalat also misrepresented company financial statement by billion of dollars and because of that the right of shareholders were been violated and they are not met the expectation and the integrity of the company management. In this date also Parmalat defaulted on USD184 million payments to the bondholders.
Because of the overstated, the stock of the company fell by 40 percent. Parmalat claimed USD5 billion with Cayman Island but it did not exist. It is announced by Bank of America. Parmalat force to concede the claim of missed payment to bondholders from the company auditors, Deloitte & Touche. Parmalat began to invest more of their operation and also selling the company to American citizen with Italian surnames. It’s have been falsified in parmalat’s account for over a decade at least $600 million from the publicly traded company and funneling it into family business.
Tanzi had sent a thirty-four page complaint to Consob and him claiming that he was being slandered by Lehman Brothers Inc that is the one who report about parmalat financial issues. In 1999, Parmalat had to change their auditor from Grant Thornton to Deloitte & Touche because of company have to change the auditor every nine years. Deloitte have no ability to locate and audit the account 999 that represent all faked revenue, asset and profits that Parmalat had accumulated over the year.
The entries were transforming into intercompany loans and credit to cover up the fake. They want to destroy the Account 999 but a printout survived. Parmalat had been profitable just only in year between 1990 and 2002 and the company had claimed to be profitable all those year. The material misstatement of the firm is not been notice by the Grant Thornton or Deloitte. There have collusion of the Parmalat’s auditor with the managers of the company to keep fraud under wraps.