Parmalat sues Deutsche bank for €17m

- Last updated on GMT

Related tags: Parmalat, Bank of america, Finance

Disgraced Italian food giant Parmalat is suing Deutsche Bank for
€17 million, which it claims it was ordered to repay two weeks
before it plunged into bankruptcy.

Parmalat claims that the German bank dictated to a top executive the exact phrasing of the dairy group's letter announcing its repayment of €17m in export credits and overdrafts. The UK's Financial Times​ was told that this was done to hide the origin of the repayment decision.

Parmalat argues that Deutsche and others allowed Parmalat to substantially increase its debt, when the lenders allegedly knew that it was already in deep financial trouble.

The suit against Deutsche Bank could therefore be only the tip of the iceberg. The German bank was involved in assisting Parmalat in the months before its former executives admitted massive fraud. When Parmalat's government-appointed administrator Enrico Bondi started work, he found a company in debt to the tune of €14.5 billion and no cash.

The FT​ reports that Deutsche Bank underwrote a €350 million bond issue for Parmalat last September and bought €130 million of another €300 million Parmalat bond underwritten by Morgan Stanley.

The suit, filed by Parmalat's in civil court in Parma, follows a similar filing last week seeking €290 million from UBS, and a $10 billion suit filed two weeks ago in New Jersey against Citigroup.

The accounting firms Deloitte and Grant Thornton, which recently audited Parmalat's accounts, is also expected to be sued.

Parmalat's lawyers believe that financial institutions including Deutsche Bank, Bank of America, Citigroup and UBS were aware of the group's financial troubles before its implosion, but continued to finance the company in exchange for high fees. However, both Citigroup and UBS have rejected Parmalat's claims.

When the Parmalat accounting scandal broke late last year, it sent shock waves through the food industry. The sheer magnitude of the deception made Bondi's job almost impossible from the outset.

PricewaterhouseCoopers, the audit firm brought in to sift through the company's accounts, uncovered further cases of false billing, false financial gains and false transactions.

Prior to the discovery of the fraud, Parmalat had claimed that its debts were no higher than €6 billion and that it had liquid assets in excess of €4.2 billion, leaving a net debt of just €1.8 billion.

But these 'liquid assets' were found to be non-existent, paper trails leading to false bank accounts and phoney investments. In January, Parmalat's 'black hole' was thought to have topped €14 billion.

Related topics: Market Trends

Related news

Follow us


View more