updated 12/30/2003 10:08:16 AM ET 2003-12-30T15:08:16

Prosecutors on Tuesday renewed their grilling of former Parmalat chief executive Calisto Tanzi as a judge weighed whether to keep him in jail pending trial over the disappearance of billions from the company's balance sheet.

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The team of three prosecutors entered Milan's San Vittore jail, where Tanzi is being held, at around 10 a.m. to investigate what the U.S. Securities and Exchange Commission is calling "one of the largest and most brazen corporate financial frauds in history."

The company filed for bankruptcy protection after it revealed that an account at Bank of America Corp. wasn't holding about $4.9 billion of its funds.

Several Italian dailies reported Tuesday that Tanzi had acknowledged during questioning Monday that $620 million had been siphoned out of the company over seven or eight years. But he insisted that any illicit acts had been carried by top financial managers on their own initiative. The reports of his remarks could not immediately be confirmed.

When asked Tuesday about the reported admission of misappropriating $620 million, Tanzi's attorney, Michele Ributti, refused to confirm a figure, although he said it was "reasonable" to think that was correct.

"It's not certain. I won't talk about a figure, but it's reasonable to think it's that," he told reporters as he arrived at the prison for the interrogation.

He said the money went principally from Parmalat to its tourism business. "The tourism sector was fed by financing coming from Parmalat. This was confirmed," he said. Parmalat's core business is dairy and food products.

U.S. securities regulators are suing the company for "grossly overstating its assets" to U.S. investors, who hold some US$1.5 billion in its bonds and notes. Regulators are seeking civil penalties, repayment of ill-gotten gains with interest and permanent injunctions against future fraud.

The Parmalat case, one of the biggest financial scandals to hit Europe, bears resemblance to the collapse of U.S. energy trading giant Enron, which also used a complex web of subsidiaries and related companies to hide billions in losses.

Tanzi, who was detained by police on Saturday, is among 20 officials under investigation in the case. Prosecutors have accused him of fraudulent bankruptcy, market rigging, making false statements and false accounting.

A judge on Tuesday was expected to rule on whether to convert his provisional detention into a formal arrest, meaning charges could be officially leveled against him. The defense has asked for house arrest.

Parmalat employs 36,000 people worldwide, 4,600 of them in the United States and Canada.

Copyright 2003 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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