A judge on Tuesday ordered former Parmalat chief executive Calisto Tanzi to remain in prison amid accusations he contributed to the near collapse of the dairy company by siphoning off millions of dollars from the company’s balance sheet.
Judge Guido Salvini rejected the defense request that Tanzi be granted house arrest pending formal indictment for what the U.S. Securities and Exchange Commission called in a lawsuit against the company “one of the largest and most brazen corporate financial frauds in history.”
Parmalat filed for bankruptcy protection after it was revealed that a Cayman Islands subsidiary, Bonlat, didn’t have about 3.95 billion euros ($4.9 billion) in a Bank of America account.
Several Italian dailies reported Tuesday that Tanzi had acknowledged during questioning Monday that 500 million euros ($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. Prosecutors say as much as 800 million euros ($1 billion) may have been misappropriated.
When asked Tuesday about the reported admission of misappropriating euro500 million ($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 a new round of questioning Tuesday by Milan prosecutors.
He said some of the money went to the Tanzi family’s tourism businesses. “The tourism sector was fed by financing coming from Parmalat. This was confirmed,” he said. Tanzi family controls a loss-making unlisted travel company, Parmatour.
Meanwhile, Stefano Tanzi, Calisto Tanzi’s son and a former CEO of Parmalat, arrived Tuesday morning at the prosecutors’ office in the company’s home base of Parma. Officials there declined to comment.
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 related companies to hide billions in losses. Parmalat had some 200 subsidiaries, including Bonlat.
U.S. securities regulators are suing Parmalat for “grossly overstating its assets” to U.S. investors, who hold some $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.
Calisto 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.
The judge overseeing the investigation was quoted in Italian newspapers as saying the company’s total debts run as high as 10 billion to 13 billion euros ($12.5 billion to $16.2 billion), although Parmalat officials have said the figure is lower.
The company said in a statement Tuesday that it was “conducting normal business operations” under new head Enzo Bondi and was seeking to reassure its suppliers that they will get paid.
Parmalat, Italy’s eighth-largest company, reported sales of 7.5 billion euros in 2002. It employs 36,000 people worldwide, 4,600 of them in the United States and Canada. Its Chicago bakery is the third-largest cookie producer in the United States.