Food for thought

Parma, Italy, Dec. 27 (Reuters): A bankruptcy court on Saturday declared Parmalat's main operating arm insolvent in a move that will help Italy's biggest food group continue operations while sorting out debts, judicial sources said.

The court in the northern city of Parma, near Parmalat's headquarters, took the decision after the group's administrator Enrico Bondi outlined the financial situation at the group.

A US auditor on Friday rejected allegations that it had masked losses at Parmalat and said it had been the victim of fraud in the multi-billion-euro corporate scandal engulfing Italy’s biggest food group.

Grant Thornton’s Italian unit issued its statement of defence as investigators were reported to be planning to interrogate Parmalat’s founder Calisto Tanzi, a key figure in a widening fraud investigation whose house was searched this week.

The probe has stirred questions over the conduct of Parmalat, its auditors and banks in the Enron-like crisis, while threatening lawsuits from creditors and Parmalat partners.

A household name in Italy and the number three cookie maker in the US, Parmalat filed for bankruptcy protection on Wednesday after revealing a hole in its accounts that investigators say could exceed €10 billion.

The scandal exploded last week when Italy's eighth biggest industrial group said a document purporting to certify that Bank of America held nearly €4 billion for Parmalat's offshore unit Bonlat had been declared false.

Grant Thornton SpA signed off on Bonlat's 2002 accounts on the basis of that document, leaving many wondering how Grant Thornton could have thought an account of that size existed apparently on the basis of one forged document.

Italian prosecutors said this week that a scanning machine had been used to forge the bank documents, on Bank of America letterhead, which Grant Thornton used to certify Bonlat's books. Investigators said people questioned earlier this week have told of a complex web of offshore shell companies hiding losses for more than a decade. Grant Thornton has audited Bonlat since 1998.

“As for Parmalat, we are neither the creators nor the accomplices,” the headline on Grant Thornton's statement read.

A judicial source said earlier this week that a person interrogated on December 22 had called Bonlat “an empty box” created in 1998 to allow “worthless credits” to be put on Parmalat's accounts.

“Grant Thornton SpA declares that it never conceived nor collaborated in carrying out any accounting or tax activity to mask the real administrative or financial situation at the Parmalat group,” the statement said.

“If anything, we are the ones who have been the victims of serious fraud,” it quoted Grant Thornton SpA chairman Lorenzo Penca as saying. It did not say who might have committed fraud.

Grant Thornton said it had instructed its lawyers to take whatever steps were necessary to protect its name. Bank of America has already filed a criminal complaint in Italy in connection with the Parmalat case.

About 20 people, including current and former Parmalat executives and unidentified outside auditors, are under investigation for fraud, false accounting and market rigging. Investigators searched the house of Parmalat’s founder Tanzi on Wednesday and sought to question him, but discovered he had left Italy for an undisclosed foreign country. Tanzi was willing to return to Italy to face questioning, a judicial source said.

Investigating magistrates in the northern city of Parma near Parmalat's headquarters have called in Tanzi to answer questions next Monday, ANSA news agency reported.

Parmalat's plight is the most spectacular corporate crisis in Italy since the Ferruzzi conglomerate sank in the early 1990s under $20 billion of debt.

Enrico Bondi, who oversaw the breakup of the Ferruzzi empire, was named on Wednesday under a new bankruptcy decree as the administrator charged with mapping a Parmalat rescue plan.