Italian judge opens Parmalat fraud hearings

Preliminary hearings begin today into the €14 billion collapse of Parmalat that could lead to one of the biggest trials in Italian…

Preliminary hearings begin today into the €14 billion collapse of Parmalat that could lead to one of the biggest trials in Italian corporate history involving the dairy group's former executives, bankers and auditors.

Ten months after Parmalat plunged into insolvency, Judge Cesare Tacconi started the closed-door hearings as to whether to order 32 accused to stand trial for financial crimes including market-rigging.

Dozens of investors flocked to Milan's main court to register as civil plaintiffs in the fraud case, a reminder of the shock waves that Parmalat sent through global markets when if collapsed late last year.

As well as potentially huge damages, Parmalat's disgraced founder, Mr Calisto Tanzi, and former executives and directors who helped him turn the company into one of Italy's biggest multinationals could face years in jail.

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Prosecutors say an inner circle of Parmalat managers, helped by three ex-Bank of America staff and outside auditors, hid the company's true finances until it collapsed under €14 billion of debt last December.

They are seeking to have 29 individuals plus three financial institutions - the Italian offices of Bank of America and of auditors Deloitte & Touche, as well as the former Italian affiliate of auditing firm Grant Thornton - put on trial for market-rigging and other fraud offences. Bank of America said it was innocent.

Thousands of investors who saw the value of their Parmalat shares or bonds go nearly bust are expected to join the prosecution as plaintiffs.

In a separate line of attack, Parmalat's administrators have filed in US courts for $10 billion damages from Citigroup and from Deloitte & Touche and Grant Thornton.

Smaller sums are being sought from other banks which worked for Parmalat as the administrators try to raise money for what remains of the once global milk and food business. More banks could yet be put on trial in Milan where prosecutors are investigating whether they misled investors in selling Parmalat bonds.