Parmalat accounting scandal summary

The company officially went bankrupt, though the Italian government used the legal mean "commissariamento" to save the trademark. Federal Reserve or other central banking systems. Through Zini, firms owned by Parmalat have been sold to certain American citizens with Italian surnames, only to be purchased again by Parmalat later.

Through that move, Tremonti hoped also to gain a handle on banking decisions to finance, for instance, infrastructure investments. Losing money on its productive activities, the company shifted more and more to the high-flying world of derivatives and other speculative enterprises.

The management claims that this was because a customer, a speculative fund named Epicurum, did not pay its bills.

Huge sums Parmalat accounting scandal summary poured into these two enterprises, which have been a loss from the very beginning. The whole operation was fake: In other words, Epicurum is owned by Parmalat.

Therefore, we must quickly review current legislation protecting investors. Misclassification of liabilities Parmalat misclassified the financing transaction of selling their receivables.

This is the third large insolvency hitting Italian investors in one year: This changed first inwhen deregulation freed the central bank from the obligation to buy government debt, and finally afterwhen the largest shareholders of the Bank of Italy were privatized.

So far, so good.

Two decades later, the company had grown into a multinational corporation diversifying into milk, dairy, beverage, bakery, and other product lines in the s, becoming listed on the Milan stock exchange inand expanding further in the s.

But such acquisitions, instead of bringing in profits, started, no later thanto bring in red figures. Hundreds of thousands of investors lost their money and would never recover it. Bonlat was a subsidiary of Parmalat set up in the Cayman Islands.

These are the controllers of the Bank of Italy, which the BoI is supposed to control. Things have now escalated, as the failure of BoI supervision in the Parmalat case is dramatically evident.

Among the more bizarre allegations: This article appears in the January 16, issue of Executive Intelligence Review. The largest bond placers have been Bank of America, Citicorp, and J.

As executive compensation packages got more complex, Cappelli adds, companies put more reliance on compensation consultants, who tend to feel they are working for the CEO and need to promote higher pay to keep the business. Completion of the earnings process: Double billing the Italian supermarkets and other retail customers Fake bank accounts: These financing transactions were made possible by overstating their assets.

The fact is that the central bank, Parmalat accounting scandal summary is supposed to exercise control over the banking system, is itself controlled by the banks, which are its shareholders! The money for the sale in the first place came from other entities owned by Parmalat, and it served only to create "liquidity" in the books.

It is now being discovered that over the years, Parmalat had become a tool of the banks, which had invented, built up, and managed the speculative scheme. How It Developed The story began inwhen Parmalat decided to become a "global player" and started a campaign of international acquisitions, especially in North and South America, financed through debt.

The other seven defendants, including executives and bankers, were acquitted. What strikes one is not only the dimension of the scheme, but the arrogance of its authors.

Parmalat bankruptcy timeline InParmalat jumped into the world of financial markets in a big way, financing several international acquisitions, especially in the Western Hemisphere, with debt. Tanzi forced Tonna to resign and replaced him with Alberto Ferraris. Because they typically expire in 10 years, options give executives an incentive to boost share prices in the short term, and some companies used accounting games to do so, Cappelli says.

The security for such bonds was provided by the alleged liquidity represented by the offshore schemes. In the Argentinian bonds case, consumer organizations have filed a legal action against the banks, because they failed to inform customers, as prescribed by law, that the investment was a high-risk one.

By the second week in January, however, there were reports that the Tanzi family did directly benefit from some improper activities. The Parmalat crisis finally broke out on Dec.Dec 30,  · Parmalat is reminiscent of several other florid Italian scandals, especially the Banco Ambrosiano affair.

Parmalat's deceptions in part involve a phony letter, purportedly from Bank of America, that alleges the existence of a. Jan 11,  · The scandal is also a fresh blow to the international accounting industry. Parmalat's auditor from was the Italian branch of Grant Thornton International, one of the largest of the so-called second-tier U.S.

accounting firms. The Parmalat Accounting Scandal 1. The events leading up to the Parmalat accounting scandal and ultimately the revelation of the accounting fraud and the reasons behind the scandal? Evolving from a small dairy shop into an international concern, Parmalat appeared to be a gigantic and stable dairy producer%(2).

Parmalat Accounting Scandal Essay

This article appears in the January 16, issue of Executive Intelligence Review. The Story Behind Parmalat's Bankruptcy by Claudio Celani.

How Parmalat Differs From U.S. Scandals

The bankruptcy of the giant food company Parmalat, warned Italian Finance Minister Giulio Tremonti on Dec. 22, runs the risk of leading to "general corporate insolvency" in Italy, if there is a run on corporate.

Prosecutors want trial for 32 over Parmalat scandal Italian prosecutors today urged a judge to put the founder of the Parmalat food group, and 31 other executives and financial institutions, on trial for their role in one of Europe's biggest financial scandals.

When the Parmalat scandal broke in mid-December it was quickly dubbed “Europe’s Enron,” suggesting that multi-billion dollar frauds are not, after all, a predominantly American phenomenon.

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Parmalat accounting scandal summary
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