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Italians demand reform after Parmalat fiasco

Angry, frustrated and bewildered, Italians say a multi-billion euro scandal at Parmalat has hurt thousands of ordinary people and underscores the need for deep reforms to prevent a costly and embarrassing repeat.
/ Source: Reuters

Like tens of thousands of Italians, Walter Toffoletto bought Parmalat bonds thinking that Italy's largest food group would be a rock-solid investment for the future.

Now, he's all regrets.

"I am one of those robbed by Parmalat," the 51-year-old office worker said on Friday in Italy's financial capital Milan, ruing his 15,000 euro ($18,660) investment in the global food group.

Angry, frustrated and bewildered, Italians say a multi-billion euro scandal at the company has hurt thousands of ordinary people and underscores the need for deep reforms to prevent a costly and embarrassing repeat.

Parmalat, a household name in Italy, filed for bankruptcy protection on Wednesday, five days after unveiling a hole in its accounts that investigators say could exceed 10 billion euros.

Public prosecutors are investigating possible fraud, false accounting and market rigging at Italy's eighth-biggest industrial group, with some 20 people including Parmalat founder and former CEO Calisto Tanzi named in the probe.

Small investors
"It's a disaster," said Elma Ravizza, a 27-year-old office worker strolling through central Milan with her one-year-old daughter.

"It has hit a lot of small investors, normal people. No one expected it. Everyone knew and trusted Parmalat, and now they have to suffer."

Italian newspapers have reported that 70,000 to 90,000 small investors own Parmalat stocks and bonds.

Parmalat's plight, the most spectacular corporate crisis in Italy since the Ferruzzi conglomerate sank in the early 1990s under $20 billion of debt, sent shockwaves through the nation's biggest banks, which lent the food group billions of euros, and raised questions about Parmalat's relations with auditors.

A blue-chip stock until the scandal broke, Parmalat has since seen its market capitalization shrink virtually to nothing from 1.8 billion euros. Its bonds were recently traded at one-fifth of their face value.

"At this point, I am very pessimistic that I'm going to get anything back," Toffoletto said. "Only if Parmalat survives with these new people in charge could there be any hope."

The government on Wednesday appointed veteran corporate rescue expert Enrico Bondi as Parmalat's commissioner, charged with saving the business within two years under a specially enacted scheme for protection from creditors.

Just 10 days earlier he had been brought in as Parmalat's chief executive officer.

Not only Tanzi to blame
Parmalat, one of the world's biggest producers of long-life milk and the number-three cookie maker in the United States, boasts a variety of brands around the globe including Santal drinks and Beatrice dairy products.

Some citizens had harsh words for Parmalat's founder Tanzi, whom investigators had planned to question on Wednesday before learning he had left the country.

Although Tanzi, 65, is a key target of the criminal probe, he has not been indicted and there is no warrant for his arrest.

A judicial source said the media-shy businessman, who stepped down as Parmalat's chief earlier this month, was willing to return to Italy to face questioning.

"Tanzi has escaped from Italy leaving behind huge debts," said Alessandro Negri, a 78-year-old retired military officer meeting friends over coffee. "It's a shame."

"There is no solid system of institutional controls of an Anglo-Saxon type," he said.

Those interrogated so far, including three former chief financial officers, have told investigators of a network of offshore shell firms masking losses for more than a decade and overseen by senior company officials.

Italians taking a midday stroll in Milan's sunlit center said Tanzi and other top managers were not the only ones to blame, as regulatory authorities had allowed it to happen.

Market regulator Consob has limited powers, able to request -- but not demand -- documents from publicly listed companies.

The Bank of Italy currently oversees the sale of bonds by banks, including Parmalat's.

But reforms could be hard to come by.

Economy Minister Giulio Tremonti wants a single regulatory body with sweeping powers over banks and securities markets. But Bank of Italy Governor Antonio Fazio opposes the plan.