Parmalat Founder Held in Custody

Calisto Tanzi is an Italian self-made man. He transformed a small milk company into one of the largest food conglomerates in the world. But this week, Parmalat’s fabled history crashed as information became public that the company had been responsible for one of the worst cases of corporate accounting fraud ever perpetrated in Europe. On Saturday, police arrested the 65-year-old company founder and former president as he walked down the street.

According to media reports, Tanzi is being question based on suspicions by prosecutors that he wired as much of €7 billion of the firm’s money into private accounts. Judicial sources told the Reuters news agency Tanzi was suspected of committing market rigging and false auditing.

Without a trace

Tanzi resigned from his post at the firm in mid-December, after the first evidence emerged that the company, famous for its dairy products, was in deep financial trouble. The previous week, it was discovered that several billions of euros were missing from Parmalat’s balance sheet. The money is still missing and prosecutors are accusing the company’s executives of having committed fraud and falsifying its balance sheet.

Just hours before Tanzi’s arrest and three days after the company filed for bankruptcy, a court in Parma, where the company has its headquarters, officially declared Parmalat’s insolvency. The ruling came, as expected, after insolvency administrator Enrico Bondi presented a report on the company’s deeply troubling financial condition.

The court has given Bondi until the end of January to present a plan for rescuing the company, which has annual revenues of €7.5 billion and employs 36,000 people in 30 countries. The Italian government also issued a directive providing the company with protection from its creditors as it seeks to restructure. The directive also calls for the protection of the many farms and delivery companies likely to be affected by Parmalat’s bankruptcy.