- The Washington Times - Monday, December 29, 2003

ROME (AP) — Prosecutors looking into the financial troubles of Parmalat argued yesterday that the dairy company’s founder was fully aware of a multibillion-dollar fraud and urged a judge to keep the one-time business baron behind bars during the investigation.

Parmalat entered bankruptcy protection last week after revelations of a huge hole in the company’s balance sheet. Founder and former Chief Executive Calisto Tanzi left the country after the bankruptcy filing but returned Saturday, at which point police detained him.

Legal officials questioned Mr. Tanzi in Milan’s San Vittore prison yesterday while a judge considered whether to keep him in jail or just under house arrest.

Mr. Tanzi’s attorneys argued that the 65-year-old was in poor health and posed no flight risk. “He’s a man who’s had a heart attack and wears a pacemaker, and who needs to be treated,” attorney Michele Ributti told reporters afterward.

Judge Guido Salvini in Milan did not issue a ruling as expected after the four-hour interrogation, but was expected to do so today.

“I can only tell you that the questioning took place in a calm atmosphere,” Judge Salvini said. “Tanzi replied to the questions posed to him by the prosecutors and by others. He offered his version of the deficit that is in question.”

The Parmalat scandal exploded Dec. 19, when the company revealed that Bank of America Corp. wasn’t holding $4.9 billion of its funds, as the Italian company had reported in September.

Since then, the estimated amount missing from its balance sheet has ballooned, with Italian reports saying as much as $12 billion could be missing over what might have been 15 years of fraudulent accounting.

Parmalat’s shares have lost more than 90 percent of their value since the company acknowledged earlier this month that it had misrepresented its financial position. Trading in the shares was suspended indefinitely by the Italian Stock Exchange late Sunday. They last traded at 13 cents.

The company, which has annual sales of $9.2 billion, produces and sells milk, yogurt, juice and other food products in Europe, the United States and around the world. It employs 36,000 people in 29 countries.

At least 20 persons, including Parmalat’s former financial officers, have been placed under investigation for suspected fraud and other charges concerning the reported falsification of company documents.

Prosecutors say Mr. Tanzi ordered the destruction of documents when the company’s situation deteriorated this month, Milan’s Corriere della Sera newspaper reported yesterday.

Italian news reports also said prosecutors believe Mr. Tanzi misappropriated about $990 million. His attorney asked Sunday about missing money, told reporters there was no money missing but at most there were “nonexistent assets” listed on Parmalat’s balance sheet.

Parma prosecutors charge Mr. Tanzi with committing fraud that resulted in the bankruptcy of a company, as well as false accounting. Prosecutors in Milan added a charge of market manipulation and making false statements to auditors.

A market-rigging charge could bring up to five years in prison, while the fraudulent-bankruptcy charge could bring three to 20 years, Italian reports said.

Police continued their investigation yesterday, searching the Milan offices of Parmalat as well as of the Tanzi family’s holding company.

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