The largest food company in Italy, Parmalat, is on the verge of bankruptcy after a €4 billion hole was revealed in its accounts.
A company statement today revealed €3.95 billion in investments and cash recorded at its Cayman Islands-based Bonlat Financing Corporation has been declared false by Bank of America.
"It is difficult to see how Parmalat can keep going after this clear indication of extensive financial irregularity," said ABN AMRO's credit analyst Ms Claire McGuckin.
The missing money dwarfs the €1 accounting scandal that rocked Dutch retailer Ahold earlier this year. That crisis drew comparisons with Enron's plunge into bankruptcy two years ago.
Parmalat's newly installed chairman and chief executive Mr Enrico Bondi called an extraordinary board meeting for this afternoon, triggering speculation in financial markets that he might resign.
"Parmalat's latest press release has dropped a bombshell," said Commerzbank in a note to clients. "To say that something smells fishy would be the understatement of the year."
The crisis engulfing the food group this week has already caused the resignation of its founder Mr Calisto Tanzi as chairman and chief executive.
From opening his first milk pasteurization plant near Parma in 1961, Mr Tanzi went on to build a dairy empire centered on long-life milk and which now has nearly 35,000 employees in 30 countries.
But long-standing confusion about Parmalat's balance sheet turned to real concern recently on signs that the group lacked the ready cash to meet its debts and other financial commitments.