Calisto Tanzi, the founder of the Parmalat food and dairy empire, was facing a further period in custody last night after being detained by police on Saturday evening.
Mr Tanzi spent yesterday being questioned by prosecuting magistrates appointed to investigate the financial collapse of Parmalat, before being placed under formal arrest by an Italian judge last night.
Parmalat was put into emergency administration over the weekend when it also emerged that Grant Thornton, one of Parmalat's auditors, had begun an internal review of its role in the affair.
The two magistrates investigating the Parmalat scandal made an application to the courts yesterday seeking Mr Tanzi's formal arrest. His provisional detention on Saturday night would last for only 48 hours under Italian law.
The magistrates questioned Mr Tanzi for more than six-and-a-half hours in connection with suspected fraud. On 19 December the company revealed a €4bn (£2.8bn) black hole in its accounts. Mr Tanzi has not been charged with any offence.
Parmalat said it had sufficient working capital to pay essential suppliers, such as milk farmers, to keep its factories open.
Grant Thornton said a team led by David McDonnell, its international chief executive, was reviewing its auditing of Parmalat and a number of its subsidiaries. A spokeswoman said: "This internal review would be normal in any case. Grant Thornton International is monitoring and reviewing the situation very closely. What there is not is a team on the ground in Italy doing an investigation."
A spokeswoman for Parmalat said the company had protection from its creditors for six months to allow a management team to produce a reconstruction plan. The company is now being led by Enrico Bondi, appointed as a company commissioner by the Italian courts under the country's emergency new bankruptcy laws rushed through last week by Silvio Berlusconi, the prime minister.
"They now have 180 days to come up with a plan and seek the approval of the Italian courts and the trade ministry," the spokeswoman said yesterday. "If that is successful then the company would have a further 18 months to put in place the restructuring plan."
It is now feared that up to €10bn could be lost to Parmalat creditors as investigators unravel a complex web of offshore subsidiaries and bank accounts used to support the company's financing arrangements. At the centre of the scandal is a Bank of America account opened by Bonlat Financing Corporation, part of the Parmalat Group, which was purported to hold €3.95bn.
But after questions were raised by Grant Thornton, Bank of America revealed it did not have an account in the name of Bonlat. It also denied the authenticity of a document that claimed to certify the existence of the €3.95bn.
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