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Copy of Parmalat scandal
Transcript of Copy of Parmalat scandal
The circumstances surrounding the case once again sow the failure to observe the law and the lack of a firm ethical base for the conduct of economics agents can be a serious impediment to the functioning of the economic and financial system. Parmalat
scandal Fraud Change of tax residence to avoid change audit Issue bonds 14M € nonexisting assets 15 years Counterfit recipts
Change of tax residence to avoid change audit
Fake Bank of America accounts
14M € nonexistent assets
Issue bonds Álvaro Cortés
Jordi Rosell Italian companies felt it would be more difficult for them to gain access to the Eurobond market By the end of 2006, the stock of bonds issued by non-financial firms had fallen back to the 1998 figure of 3% of GDP.
Investors had become more selective with regard to Italian firms issuing unrated or high-yield securities.
Impact on some segments of the Italian stock market, notable in the food segment.
The quality of banks’ loan portfolios deteriorated. Parmalat Finanziaria SpA, is a diversified, international food company .
The company is best known for its revolutionary, ultra-high temperature (UHT) milk.
Parmalat also produces, distributes, and markets a big range of other food products.
The founding Tanzi family owned 51% of the company. Company's history Global expansion In 1997, Parmalat decided to become a "global player" and started a campaign of international acquisitions, financed through debt. http://news.bbc.co.uk/today/hi/today/newsid_9275000/9275406.stm Where was the money allocated? Leaders of the plot Parma F.C.
Daughter’s tourism companies
International expansion ussing the inssuance of bonds and shares The impact on the markets Calisto Tanzi Fausto Tonna Giovanni Bocini Parmalat liquidity of €4bn did not exist, and that €7bn in bonds of investors' money had evaporated as well. Parmalat is the largest bankruptcy in European history, representing 1.5% of Italian GNP Such acquisitions, instead of bringing in profits, started, no later than 2001, to bring in red figures. Due to:
1- Increasing cost of capital.
2- Lack of transparency on its cash flow.
3- The mistrust on the market due to the default of his fellow food group Cirio.
-Parmalat's targets for 2003 to 2005, a reduction in growth of 3 per cent per year. Gian Paolo Zini Parmalat's impact Global expansion The firm's shares slumped after the company admitted to a hole in its accounts Parmalat vs. Enron Unlike Enron, Parmalat is a group with strong industrial roots, with tangible assets that are generating revenues and profits.
Parmalat had different involment of auditors.
Ineffective supervision and lack of accounting controls (in both) Lorenza Penca Gianfrancco Bocchi Luciano Del Soldato Claudio Pessina Grant Thornton (GT) was Parmalat’s auditor through the first-half of 1999. In 1998 the duty to appoint new auditors created a big problem to both GT and Parmalat, which feared that the new auditors could discover the true purpose of the offshore entities. Allegedly, Mr Bianchi and Mr Penca used the GT network to create a new shield, the infamous Bonlat, that could be certified by GT, acting as secondary auditor, with the new auditor acting as primary auditor. With the benefit of hindsight it seems that the problem could have offered an early warning about Parmalat’s management attitude. For a five-year period Deloitte certified Parmalat’s statements. It is not clear whether it was the market turmoil that started in February 2003 to force Deloitte to take more care, or the action of the Italian watchdog; but in December the fake accounts where revealed and the bankruptcy of the company was unavoidable. External Audit