SUBSCRIBE

Breaking News on Food & Beverage Development - EuropeUS edition | Asian edition

Headlines > Market Trends

Parmalat to take on Bank of America

By Anthony Fletcher , 03-Feb-2006

Parmalat can proceed with its legal action against Bank of America over the dairy company's financial collapse in 2003, according to a US judge.

The decision is bad news for the one-time Parmalat lender, which argued last November that it should be dismissed from an amended lawsuit brought by the Italian dairy giant's chief executive Enrico Bondi.

But a district judge ruled that Bondi could challenge the Bank of America's alleged failure to disclose the true interest rate of a December 1996 loan to Parmalat Argentina, which he claims contributed to the group's spectacular meltdown.

The judge did not rule on the strength of the claims, but accepted that Bondi had argued them sufficiently enough to proceed with his case. For its part, the Bank of America has said that it was little more than a lender to Parmalat, and did not act as a financial adviser to the company.

Parmalat went into administration in December 2003 following the revelation that a key account with Bank of America did not exist. Holes in the firms accounts hid the fact that the company was a whopping 14 billion in debt.

Since being appointed administrator, Bondi has pursued allegedly implicated financial institutions in order to recoup the lost billions with incredible vigour, and this latest decision is further vindication of his strategy.

A court hearing on 1 March will decide whether 13 bank executives and four global banks should be sent to trial over the collapse of Parmalat. Under Italian law, companies can stand trial, and can be forced to close if found guilty.

The foreign banks are Citigroup and Morgan Stanley, Germany's Deutsche Bank and Swiss bank UBS. The banks have all denied wrongdoing in Parmalat's collapse.

In addition Calisto Tanzi, the founder of the scandal-hit dairy, faces charges of false accounting and share price manipulation. He is being tried in Milan alongside 15 former executives of the company, which was built up by Tanzi from a small family grocer in the northern Italian city of Parma to a company with 37,000 staff.

He stands accused of manipulating the stock market, publishing false balance sheets and obstructing regulation by the stock market watchdog Consob.

Subscribe to our FREE newsletter

Get FREE access to authoritative breaking news, videos, podcasts, webinars and white papers. SUBSCRIBE