Parmalat founder Tanzi drawn into Italian fraud investigation

The crisis at Parmalat that is widely expected to force the troubled Italian food group to file for bankruptcy protection deepened yesterday as rumours circulated that its founder, Calisto Tanzi, and other executives had been dragged into an inquiry into suspected fraud at the business.

Mr Tanzi and two former finance directors, Alberto Ferraris and Luciano Del Soldato, were cited as part of an investigation into possible false accounting and fraud.

Parmalat, which is already being labelled "Europe's Enron", last week admitted to a near €4bn black hole in its accounts although it is feared it could be even larger. Mr Tanzi was quoted in an Italian newspaper as saying that a €3bn bond repayment, detailed in its accounts to the end of September, had not in fact taken place. The Milan-based company, set up by Mr Tanzi in 1961, makes a variety of foods, from dairy products - including Loseley ice cream - to soups, canned vegetables and biscuits and savoury snacks. It employs about 35,000 people in 30 countries.

Under the turnaround specialist Enrico Bondi, who was appointed chairman only last week, Parmalat is expected to file for bankruptcy protection although the Italian government may intervene to help.

Mr Bondi and his team were yesterday locked in talks with their advisers on how best to keep the operation afloat. Parmalat's board is due to meet this afternoon while Italy's cabinet is also planning to discuss the matter today.

Sources speculated last night that the Italian government was looking at proposing an "innovative solution" that would facilitate a more flexible Chapter 11 bankrupty protection style structure for Parmalat. Parmalat also said yesterday that negotiations, aimed at delaying the exercise of an option that will force it to buy a $400m stake in its Brazilian unit, were still ongoing.

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