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 âpared-down, cleaned-up, newly listed Parmalat.â
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 âintegral part of these financial manipulations.â
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 â¬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.