- The Washington Times - Tuesday, February 10, 2004

ROME (AP) — Prosecutors looking into fraud-riddled Parmalat have placed six international banks, the fund management unit of Italy’s largest bank and banking executives under investigation for possible market rigging, news reports said yesterday.

The ANSA news agency said prosecutors declined to identify any executives, but had placed under investigation Bank of America, Citigroup, Deutsche Bank, Morgan Stanley, UBS, Banca Popolare di Lodi and Nextra, fund manager of Banca Intesa, Italy’s largest bank.

None of the banks would confirm the reports yesterday, but they have previously denied wrongdoing.

Prosecutors conducting the investigation in Milan are trying to determine whether banks knowingly helped the dairy giant spread false information to support the company. Authorities have taken documents relating to Parmalat from the banks’ offices in Milan, and said last week they were planning to place under investigation about 15 unidentified people linked to financial institutions.

International banks and ratings agencies have come under scrutiny for helping Parmalat place bonds, for extending it credit and for issuing decent ratings despite irregularities in company books. The financial institutions say they were misled by Parmalat’s fraudulent bookkeeping.

Yesterday, officials from Bank of America, UBS and Banca Intesa said the banks had not received formal notification they were under investigation. Citigroup, Deutsche Bank and Morgan Stanley declined to comment. Banca Popolare di Lodi officials were not immediately available for comment.

Also yesterday, Parmalat founder Calisto Tanzi was transferred from a Milan prison to one in Parma, near the headquarters of the company he ran for decades. Mr. Tanzi is one of 10 persons detained as part of the investigation.

Prosecutors in Parma asked that Mr. Tanzi be transferred so he could be interrogated directly in their probe into fraudulent bankruptcy.

Milan prosecutors, conducting separate investigations into market rigging, have already questioned Mr. Tanzi repeatedly.

Meanwhile, four officials from the Swiss federal prosecutor’s office were in Milan as part of a money-laundering investigation begun by Swiss authorities in connection with the Parmalat scandal.

Spokeswoman Andrea Sadecky of the federal prosecutor’s office said the officials were holding informal discussions but Switzerland has made no formal request for legal assistance from Italy.

The Parmalat scandal erupted in December after the company acknowledged that Bank of America did not have nearly $5 billion of its funds, as the dairy company had falsely claimed. Soon afterward, Parmalat went into bankruptcy protection.

Auditors now say the company had about $18 billion in debt at the end of September — eight times what it had claimed.

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