Big Four accounting firm Deloitte & Touche has lost its bid for dismissal of a class-action lawsuit by investors in Parmalat, the now-bankrupt dairy giant based in Parma, Italy.
Deloitte had asked a federal court judge in New York to dismiss the suit brought against its U.S. and international arms, arguing that the firm's global affiliates cannot be responsible for the actions of other arms. Even though Deloitte organized itself as networks of legally separate and independent partnerships in various countries, Judge Lewis Kaplan on Tuesday agreed with the investors' attorneys that the firm acted as one entity, the Wall Street Journal reported.
An attorney for Parmalat shareholders, Stuart Grant, called the ruling âdevastatingâ for Deloitte. Robert Roseman, a partner at Spector, Roseman & Kodroff, who is representing Parmalat bondholders, said of Kaplan's decision, âHe accepted our one-firm argument.â
A spokeswoman for the Deloitte's international arm, Deloitte Touche Tohmatsu, said attorneys were still examining the ruling and declined further comment.
Deloitte & Touch SpA, the Italian arm of the firm, was Parmalat's official auditor, but work was also done by Deloitte affiliates in about 30 countries.
A judge in Milan has also ruled that the Italian office of Bank of America Corp. will go to trial as a civil party, as the employer of three people who were indicted in connection with Parmalat's collapse, Reuters reported.
The judge also formally charged Parmalat founder Calisto Tanzi, 15 other executives, auditors Deloitte & Touche and Grant Thornton's former Italian affiliate with helping Parmalat hide a true picture of its finances. Three Bank of America employees and two Deloitte partners were also indicted as individuals.
Parmalat filed for bankruptcy in December 2003 after one of the biggest frauds in Europe's history was revealed â a $17 billion hole in the books allegedly devised by former executives and hidden for 10 years.