Parmalat Seeks $10 Billion from Ex-Auditors

Failed dairy giant Parmalat continued efforts to save itself Wednesday by filing suit against its former auditors for more than $10 billion.

According to the Wall Street Journal, bankruptcy administrator Enrico Bondi is working to recover sizable damages for creditors, swap creditors' debt for equity and create a “pared-down, cleaned-up, newly listed Parmalat.”

Wednesday's suit was filed against Deloitte & Touche Tohmatsu International and Grant Thornton International in Circuit Court of Cook County, Ill. Previously, Parmalat filed a $10 billion claim against Citigroup, which is accused of going along with the financial deception perpetrated by Parmalat's former executives. Bondi called Citigroup's involvement an “integral part of these financial manipulations.”

Next month, 32 former executives, bankers and auditors are set to stand trial in Milan on multiple allegations of fraud that led to the company's collapse last December.

A report commissioned by Milan prosecutors found that executives and auditors created false records to show steady growth while hiding debt and the siphoning off of hundreds of millions of euros by the company's founder and former chairman, Calisto Tanzi.

The report, by bankruptcy expert Stefania Chiaruttini, said the company's accounting policies gave priority "to the substance of transactions over their form." Under Deloitte & Touche's audits, however, Parmalat booked debt as equity and securitized false assets, moves that allowed the company to inflate earnings and falsify its financial position, the report said.

As for Grant Thornton's Italian branch, it audited Parmalat subsidiaries such as Bonlat, the Cayman Islands unit that booked €3.95 billion in fictitious assets with Bank of America. When it was discovered that those assets didn't exist, Parmalat was declared insolvent.

Grant Thornton International broke from its Italian branch, Grant Thornton SpA, after Parmalat's collapse last year. Grant Thornton SpA has since been renamed Italaudit SpA.

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Already a member? log in here.

Upcoming CPE Webinars

Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.