Investigators question Parmalat executives; doctors examine company founder over heart problems

Friday, January 2nd 2004, 12:00 am
By: News On 6

PARMA, Italy (AP) _ Investigating judges questioned Parmalat financial officials and a lawyer, the latest suspects in a corporate scandal, while doctors examined company founder Calisto Tanzi to determine whether he's healthy enough to remain in prison.

Investigators are trying to trace the roots of Parmalat's spectacular fall _ a case that has been called ``Europe's Enron'' because both the dairy giant and the U.S. energy trader used related companies to hide losses.

In Milan, judge Pietro Carfagna questioned Parmalat lawyer Gianpaolo Zini and auditor Lorenzo Penca, who were detained Wednesday by police on accusations of false accounting and fraud leading to bankruptcy.

In Parma, where Parmalat has its headquarters, another magistrate questioned former Parmalat finance directors Fausto Tonna and Luciano Del Soldato, who were picked up Wednesday on similar charges, witnesses said.

Parmalat, Italy's eighth-largest company and the No. 3 maker of cookies in the United States through its Archway brand, has filed for bankruptcy protection from its creditors after acknowledging a multi-billion dollar hole in its balance sheet. Tanzi has told prosecutors the amount could be as much as $10 billion, although prosecutors believe it could go as high as $12.5 billion.

Tanzi has also acknowledged he shifted some $620 million from Parmalat's coffers to the Tanzi family's loss-making travel businesses _ an apparent focus now for investigators trying to trace lost cash.

Prosecutors say Parmalat used a crude system of forged documents and offshore companies to hide losses at the dairy giant. The U.S. Securities and Exchange Commission, which has sued Parmalat in the United States, has accused the company of committing ``one of the largest and most brazen corporate financial frauds in history.''

An SEC official has been meeting with Italian prosecutors to plan the next steps in the investigation.

Tanzi has been jailed for a week on Parma charges of false accounting and fraud leading to bankruptcy, as well as accusations by Milan prosecutors of market-rigging and making false statements to auditors. None of the eight men in custody has been charged.

A Milan judge, Guido Piffer, ordered Tanzi examined by doctors before deciding whether to keep the 65-year-old jailed pending formal indictment or to grant defense requests for house arrest because of his heart trouble.

Two court-appointed doctors spent a little over an hour at Milan's San Vittore prison Friday and made no comments to reporters as they left. Tanzi's family also sent Dr. Livio Deicas, a specialist in heart surgery, to supervise the visit.

Deicas told reporters afterward that Tanzi was totally ``worn out.''

Defense attorney Fabio Belloni, who also visited Tanzi on Friday, said he feared for his client's health. ``Incarceration by itself is an element of risk for the coronary arteries of our client,'' he told reporters.

According to Italian news reports, defense lawyers have asked that barring house arrest Tanzi be transferred from Milan to Parma, where the prison has better medical facilities.

One judge has already denied Tanzi house arrest. If Piffer grants Tanzi house arrest, it's not clear whether his order would supersede the previous one keeping him in prison.

Parmalat was placed under the supervision of turnaround expert Enrico Bondi after the company acknowledged on Dec. 19 that its Bonlat subsidiary in the Cayman Islands didn't have the $4.9 billion in a Bank of America account that it had reported in September. The bank says the letter confirming the money was forged.

Italian news reports have said Bondi is now considering the sale of the Parma soccer club, among other assets, to help Parmalat regain its financial footing. Parmalat has also hired a consultant to find a buyer for its Archway cookies business in North America.