updated 7/30/2004 8:19:46 AM ET 2004-07-30T12:19:46

Italian dairy giant Parmalat, which is reeling from a massive fraud scandal involving billions of dollars of missing money, sued Citigroup Inc., and some of its subsidiaries Thursday, seeking to recover damages, company officials said.

The suit is part of a process aimed at seeking “recovery from third parties believed to have played a role in Parmalat’s collapse,” said a statement from Parmalat.

The lawsuit, filed in state Superior Court in Hackensack, N.J., charges that Citigroup’s Citibank unit, as financial adviser and investment bank, “played an active role in the manipulation of Parmalat’s financial results,” said John Quinn. He filed the suit on behalf of Enrico Bondi, the turnaround expert trying to salvage the company.

The lawsuit was filed in New Jersey because both Citibank and Parmalat have operations there, he said. Those include Parmalat USA and Farmland Diaries LLC, both in Wallington, Bergen County.

“Citibank was involved in structuring a series of complex financial transactions to disguise the true debt situation and artificially increase reported cash flow from operations,” Quinn said.

Although the lawsuit does not specify monetary damages, Quinn said, “There’s no question that the loss of value at Parmalat is in the billions of dollars.”

Citigroup, which provided investment banking services to Parmalat, issued a brief statement saying it had not yet reviewed the lawsuit and was unable to comment.

“However, Citigroup lost hundreds of millions of dollars as a result of Parmalat’s fraudulent conduct, and we will continue to pursue our substantial claims against the company and defend against frivolous claims in search of a deep pocket,” the statement said.

An estimated $12.5 billion is missing from Parmalat’s balance sheet after what may have been 15 years of false accounting.

Parmalat settles with SEC
Parmalat, which filed for bankruptcy protection last year, settled with U.S. regulators Wednesday, agreeing to make corporate reforms. The settlement with the Securities and Exchange Commission did not include a fine and Parmalat admitted no wrongdoing.

The SEC had accused the company of selling nearly $1.5 billion in bonds and notes to U.S. institutional investors and misleading them by grossly overstating its assets in financial statements.

Bondi is leading efforts to save the juice and dairy conglomerate by slashing the number of brands from 120 to 30 and concentrating on products which were at the core of Parmalat’s development, mainly milk, yogurt and juice.

Once with plants and other businesses in 29 countries — including a strong presence in the United States, Europe and Latin America — Parmalat has announced it is scaling back to 10 countries.

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