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Matthew Bradley

on 24 April 2013

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Transcript of Parmalat

On March 28th, Chief Financial Officer (CFO) Fausto Tonna resigns and is replaced by Alberto Ferraris. September 12, Parmalat drops plan for 300m euro debt sale November 14 - Mr Ferraris resigns and is replaced as chief financial officer by Luciano Del Soldato.

December 9 - The company misses a 150m euro bond payment and Mr Del Soldato quits. Enrico Bondi is called in by the government to help turn the company around. December 15 - Mr Tanzi resigns as chairman and chief executive officer of Parmalat, and is replaced by Mr Bondi.

December 19 - Bank of America claims a document showing 3.9bn euros in off-shore affiliate Bonlat's bank account is forged. December 22- Parmalat shares hit their lowest level, losing 97% of their value, and are suspended. The company is valued at just under 90m euros ($100m, £60m).

December 24 - Parmalat goes into administration. January 26 - Auditors determine that as of September 2003 Parmalat had debts of 14.3bn euros, almost eight times what management had claimed at the time.

February 24 - Parmalat USA, the firm's American subsidiary, filed for bankruptcy protection in New York.

May 26 - Prosecutors call for 29 people, the Bank of America and Parmalat's two auditors to stand trial. Tanzi converts his father’s ham retailer in the city of Parma into a global dairy and food giant largely on the basis of long-life milk. Parmalat starts to diversify its products. The Company Europe's Enron Parmalat became listed in the Milan Stock exchange in the 1990's 1961 Parmalat founded by Calisto Tanzi 1990 The company later acquired subsidiaries all over the world. This includes Asia, southern Africa, Australia, North and South America, and is moving into Eastern Europe. 1999 The company set up off-shore subsidiary Bonlat in the Cayman Islands, which is now at the center of the accusations of fraudulent accounting. 2002 Parmalat's share price reaches a record high, valuing the company at more than 3.7bn euros (£2.5bn; $4.4bn). The company employs more than 30,000 people in 30 countries. The Scandal 2003 On February 27, 2003, Parmalat gives up trying to sell 500m euro bond issue, citing unfavorable market conditions. November 11,
Shares are hammered amid questions regarding transactions with the Epicurum fund in the Cayman Islands and drop significantly. July - October
Parmalat sues the following seeking damages of billions: December 31 - Police arrest five former Parmalat executives including Fausto Tonna and Luciano Del Soldato. 2004 Parmalat then widens their attack and targets 45 Italian and International banks. 2005 January 25 - A court rejects compensation claims by the Bank of America and Grant Thornton.

February 3 - Parmalat reports a doubling of fourth-quarter pre-tax profit to 77m euros from a year earlier. May 27 - Italy's financial markets regulator Consob gives permission for Parmalat to relist on the stock exchange.

June 23 - Morgan Stanley agrees a 155m euros settlement with Parmalat relating to a 2003 bond deal.

June 25 - Prosecutors charge 16 people, including Calisto Tanzi, over their roles in the collapse of Parmalat. How did the scandal happen? Responsibility of Creditors Prevention Internal Controls Sources • Lack of corporate governance
• Tanzi family members held 51% of its shares and many of them had key positions in Parmalat and its subsidiaries
• Lack of independence within Parmalat’s corporate structure
• Parmalat lacked a diverse arrangement of key board committees
• The transparency of many decisions and concerns were not disclosed to stakeholders, such as executive and director salaries and stock ownership held by directors and officers
• The board failed to set guidelines and properly disclose details surrounding evaluations, term limits, and retirement ages Integrity and ethics
audit committee participation
management philosophy
authority The banks cannot be responsible for the lending of the money.
The audits were conducted by an outside source and not by the bank itself.
2 big firms conducted these audits ( Deloitte and Grant Thornton) and the banks trust their auditing skills
The banks can be held responsible if these audits were conducted by small auditing firms that no one has heard of
To prevent the banks from losing their money they can get secured bonds from the company Risks in Parmalat's control environment Government can execute laws & policies with a greater penalty.
Auditors should continually look over business operations, Parmalat - auditors were in on the scandal.
Employees should take responsibility for certain task(s). Also, unusual actions should be reported
Company creates system of internal controls. •Assets should be kept in a safe place
•Each employer follow a specific task
•Approval and authorization of any transaction should only be made by some employees. After going on to buy most of its competitors, Parmalat decided to invest in football clubs, which caused huge loses. As the losses grew, Parmalat began to open over 200 off-shore companies that were used to conceal the losses. With these, Parmalat began to issue bonds to raise more money. Most of these were bought by Bank of America, Citicorps and J.P. Morgan Exposure Behind the scenes! 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.

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.

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. How it was possible http://en.wikipedia.org/wiki/Parmalat
http://www.worldfinance.com/home/special-reports-home/the-parmalat-scandal Prevention
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