Founder of Parmalat is sentenced to 18 years

(REUTERS)

An Italian court sentenced the founder of Parmalat to 18 years in prison yesterday for his role in the Italian dairy company's 2003 collapse, Europe's biggest corporate bankruptcy at the time.

Parmalat buckled in December 2003 under a €14bn (£12bn) hole in its accounts. Its demise wiped out the savings of more than 100,000 small investors who had bet on Parmalat's investment-grade corporate bonds.

Calisto Tanzi, who was also Parmalat's chief executive, was found guilty on charges of fraudulent bankruptcy and criminal conspiracy in the main trial, which began in 2008 in Parma, over the scandal dubbed "Europe's Enron".

Prosecutors had sought 20 years in prison for Tanzi, 72. He will appeal against the ruling, a process that can take years in Italy's slow-moving justice system. He is also appealing against a ten-year sentence from a separate trial in Milan for market rigging and obstructing market regulators. It is rare for someone in Italy to serve a prison sentence at an advanced age, although Tanzi did spend several months in jail in 2004.

The Parmalat crisis erupted when it was revealed that a €4bn bank account held by a Cayman Islands unit did not exist. Management sought bankruptcy protection and prosecutors launched a fraud investigation.

Despite its investment-grade credit rating, concerns had been voiced for months over Parmalat's failure to explain why it did not use the abundant cash shown on its balance sheet to cut debt. Parmalat was restructured and relisted on the Milan bourse in 2005. It has recouped more than $2bn from settlements with banks including US investment banks Morgan Stanley and the former Merrill Lynch.