The Parmalat group of companies, which originated in Italy, collapsed in 2003. One of the main reasons behind the collapse of the dairy giant was a €14 billion debt which had not been properly recorded in the group’s books.
After Parmalat’s downfall, Italian regulators undertook a massive investigation of the group’s affairs. The investigation culminated in civil and criminal proceedings being commenced against former Parmalat directors and officers including the group chief executive and chief financial officers
Earlier this week, an Italian Court in the city of Parma sentenced the former Parmalat CEO, Calisto Tanzi, to eighteen years in prison for his role in the largest corporate collapse in European history. Mr Tanzi, who was found guilty of criminal association and fraudulent bankruptcy, has long maintained his innocence, asserting that he was never made fully aware of the debt position and that the group’s foreign bankers, who were predominantly American, led the group astray.
Italian regulators have also been successful in:
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prosecuting criminal charges against fifteen other former Parmalat executives who all received jail terms; and
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securing compensation orders which require the former executives to pay €2 billion towards a fund to be distributed amongst thousands of defrauded investors.
Mr Tanzi’s lawyers have already indicated that they will lodge an appeal with the Italian Supreme Court which will probably mean that the 72 year old will not actually serve any time in prison, if at all, for a while to come.
The findings against the former Parmalat executives should serve as a timely reminder to directors and officers about their corporate duties and responsibilities and the sometimes severe consequences of getting things wrong.
