Escorted on either side by a policeman and with his handcuffed hands hidden underneath his overcoat, the middle-aged gentleman in the elegant charcoal grey suit did not look like a happy camper, writes Paddy Agnew
As he came level with the posse of cameramen and reporters gathered outside the public prosecutor's office in Parma, the detainee spat out, repeating himself three times: "I wish all of you and your families a slow and painful death."
The source of this cheery greeting on Monday was Fausto Tonna, the abrasive former finance director of Italian dairy multinational Parmalat, the Parma-based food products company which collapsed just before Christmas leaving behind it an alleged €8-13 billion dollar "hole". Mr Tonna is just one of eight people, including the company founder Calisto Tanzi, currently in detention in the wake of a corporate collapse that has quickly earned itself the unwelcome epithet of "Europe's Enron".
As Parmalat finance director for much of the past two decades, Mr Tonna played a crucial role in the rise and rise of the one-time modest family-run business (hams and preserves) into a multinational corporate giant employing 36,400 people at 139 plants worldwide and with estimated annual revenues of €7.6 billion. In his heyday at Parmalat, Mr Tonna was well known for his intemperate ways which often saw windows smashed, voices raised and calculators thrown out the window.
Just at the moment, however, international investors from Amsterdam to Alaska would probably like to hang Mr Tonna out the window as they seek answers to the mysteries of a company collapse which may owe much not just to complicated off balance sheet financial transactions (i.e. cooking the books) but also to some level of collusion between banks, auditors and Parmalat.
That all was not well with one of the flagship companies of the Italian economy first became patently obvious on December 9th when the company failed to make a €150 million bond payment. That failure prompted auditors and banks to scrutinize company accounts, leading them to the supposedly reassuring discovery that some €3.9 billion or 38 per cent of Parmalat's assets were in a Bank of America account in the Cayman Islands, held in the name of a Parmalat subsidiary called Bonlat.
However, on December 19th, up stepped the Bank of America to say that, oh no, no such account exists. From that point on, events moved swiftly. A government protective bankruptcy decree was enacted, suspending the company's old debt and sending in state-appointed administrator Enrico Bondi. The latter now has 180 days in which to first determine the true condition of the balance sheet and then present a financial and industrial plan to authorities.
In the meantime, "padre padrone" Tanzi was arrested but not after he had been allowed to leave the country on a magical mystery tour which took in Ecuador and probably other destinations in North and South America, not to mention a pilgrimage to Fatima in Portugal. Mr Tanzi is currently being investigated regarding charges of fraud, embezzlement, false accounting and misleading investors.
Also under investigation along with Mr Tanzi are at least 19 other people including his brother, Giovanni, his son Stefano, Fausto Tonna and Gianfranco Bocchi, the Parmalat executive who allegedly used a scanner, scissors and some old-fashioned glue to fabricate a false Bank of America letter, confirming the infamous Bonlat account in the Cayman Islands.
Significantly, currently under arrest are Lorenzo Penca and Maurizio Bianchi, two senior executives in the Italian branch of Grant Thornton International, the accounting firm which audited Parmalat's books from 1990 to 1999 and which subsequently continued to audit its offshore entities, including Bonlat in the Cayman Islands.
Italian state prosecutors clearly want to know just how Parmalat managers were allowed to simply invent assets in order to offset up to €13 billion of liabilities, without the auditors discovering such blatant accounting fraud. During questioning, Fausto Tonna has reportedly confirmed the Parmalat propensity for creative accounting, telling investigators: "Four times a year, the system of putting together false documents was activated on the occasion of the four balance sheet operations that the company had"
In the US, the Securities and Exchange Commission has sued Parmalat for "brazen fraud" in misleading investors while the law firm Milberg Weiss Bershad Hynes and Lerach, acting on behalf of a group of private investors, including the Southern Alaskan Carpenters' Pension Fund, is suing Parmalat and "outside financial services and auditing firms" for $1 billion.
Further international ramifications of the Parmalat collapse concern not only the Ireland-based Parmalat subsidiary, Eurofoods IFSC but also the Dutch market regulator, the Authority for Financial Markets, which is looking into three Parmalat companies, namely Parmalat Netherlands, Parmalat Finance Corporation and Parmalat Capital Netherlands, all based in Rotterdam.
Many questions remain unanswered. For a start, where are the missing billions? Secondly, were they used to plug operating losses, pay creditors or illegally enrich management and the Tanzi family? How much did old man Tanzi know about his company's imaginative accountancy? Did he, as his associates claim, oversee every detail of the massive fraud, to the point of ordering the destruction of company documents? Furthermore, what was the link between Parmalat and Parmatours, the family-owned tour operator set up by Tanzi senior for his daughter Francesca and to which more than €1 billion of Parmalat money was directed?
With the dust not so much settling but rather still rising on this huge corporate crisis, independent analysts argue that the Parmalat collapse may have grave long-term implications for both Italian industry and the Italian economy. One centre-left senator this week told The Irish Times: "Given historical precedents such as the Banco Ambrosiano and Montedison scandals, major foreign investors are bound to be put off by the Parmalat collapse Anyone coming into Italy will ask themselves if the accounts and balance sheets they are shown are, at best, highly optimistic, if not totally fictitious?"
Other analysts agree, arguing that attracting foreign investment into Italy was already difficult enough in a country with 0.8 per cent economic growth rate, where organised crime still impedes one in three companies in southern Italy and which currently stands at number 35 (below Oman, Botswana, Qatar and Uruguay) in the UK-based Transparency International Corruption Index. Not for nothing, the ratings agency Standard & Poor's currently attributes a "negative outlook" to Italy for 2004.
Then, too, Parmalat, like many Italian companies, was family run (Calisto Tanzi owns a 51 per cent shareholding), leading to murky corporate governance and a chain of holding companies (Parmalat directly or indirectly controls nearly 400 companies worldwide) whose chinese-box, back-to-back relationships are almost unfathomable.
Finally, there are the thorny questions of both political responsibility and the credibility of the Italian banking system. Not surprisingly, those Italian banks heavily exposed to Parmalat such as Capitalia took a serious hit on the bourse this week.
Not surprisingly either, Finance Minister Giulio Tremonti has already said he wishes to create a new regulatory authority which would absorb the powers of Consob, the current main securities and market regulator, and at the same time reduce the role of the Bank of Italy.
Such a move may be well and good but it seems in sharp contrast with one of the earliest pieces of legislation introduced by the government of media tycoon Silvio Berlusconi, two years ago. That legislation saw the one time crime of "false accounting" reduced from a felony to a misdemeanour.
There are many who think that such legislation represented nothing more or less than an open-ended invitation to keep on fiddling the books while Rome burns.
