A €4 billion accounting scandal at Italy's Parmalat snowballed yesterday as the food group's founder and two former finance directors became targets of a criminal probe.
Parmalat's new chairman and chief executive, Mr Enrico Bondi, was also considering bankruptcy protection options while politicians mulled bailing out Italy's eighth-largest industrial concern in a case that many are calling "Europe's Enron".
Following Friday's shock revelation of a huge accounting hole at the company, which media reports said could widen to €10 billion, a judicial source said Parmalat's founder, Mr Calisto Tanzi, had been put under investigation, a week after he stepped down as chairman and chief executive.
Prosecutors also named three former finance directors - Mr Fausto Tonna, Mr Alberto Ferraris and Mr Luciano Del Soldato - in their probe into possible false accounting, fraud and market rigging at Italy's biggest food group, judicial sources said.
Mr Ferraris and Mr Del Soldato were questioned yesterday. They admitted providing false information but said the plan had been thought up by Mr Tanzi and Mr Tonna.
Parmalat, with 35,000 employees in 30 countries, stunned markets on Friday when it said a document showing €3.95 billion held by Cayman Islands unit Bonlat Financing Corp had been declared false by Bank of America.
Parmalat's newly installed management hopes it might recover part of the money that has disappeared from the dairy group's accounts, but most of the money the creditors are likely to recover will come from the sale of the company's far-flung operations.
Parmalat this week may seek bankruptcy protection, giving management up to two years to hold off creditors while it sorts out its complex accounts.
Under Italian law, the two types of bankruptcy filing allow management to sell assets in order to redress the group, although the paperwork - and delays and political interference - varies.
Many analysts had valued Parmalat's break-up value at €4.5-€5.5 billion. That, however, was before the company's bombshell last Friday.
Over the weekend, bankers said previous Parmalat executives admitted the hole could be €7 billion, not counting the risk of off-balance sheet debt that may top €2 billion.
Mr Tanzi opened his first milk pasteurisation plant in 1961 and built a dairy and food group that racked up revenues of more than €7.5 billion last year.
As the investigation gathered steam, Mr Bondi met Italy's industry minister in Rome yesterday, two days after Prime Minister Silvio Berlusconi vowed his government would save operations and jobs at Parmalat. - (Reuters / Financial Times Service)
