Parmalat scandal: web widens with a further seven arrests

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The Independent Online

Seven more people closely involved in the Parmalat scandal were arrested in Italy yesterday and an eighth, the company's representative in Venezuela, was being sought. Those arrested included the chairman and a partner in Grant Thornton Spa, one of Parmalat's auditors, whom investigating magistrates have implicated in the hiding of the group's multi-billion euro debts. The chairman of the Italian arm of the international auditor, Lorenzo Penca, later announced his resignation.

Those arrested yesterday include Fausto Tonna, formerly the group's director general, and Luciano Del Soldato, a former group finance director. The disgraced founder and former president of the group, Calisto Tanzi, under interrogation in San Vittore prison, Milan, named the two as the men who had contrived the elaborate schemes involving offshore derivatives transactions by which Parmalat attempted to hide losses estimated at €10bn to €13bn (£7bn to £9bn).

At the time of its collapse, Parmalat had more than 200 offshore subsidiaries. The Italian food group was the eighth biggest company in Italy and one of its few global brands.

Yesterday inspectors from the US Security and Exchange Commission arrived in Parma for talks with magistrates investigating the collapse. The SEC, which has described the group's failure as "one of the largest and most brazen financial frauds in history," aims to obtain repayment with interest of money that should have gone to US investors, who hold about $1.5 billion (£800m) in Parmalat bonds and shares.

Mr Tanzi, the man at the centre of the scandal who built his corporate empire from humble beginnings 40 years ago, was said by his lawyer yesterday to be "a broken man". On Tuesday Milanese magistrates decided that he must remain in prison rather than being confined to house arrest because he was "a danger to society".

Mr Tanzi's lawyer, Fabio Belloni, speaking to reporters as he arrived at a Milan court to meet prosecutors, said none of the €500 million that Mr Tanzi has admitted embezzling from Parmalat was for his personal use.

"It was an attempt to keep going forward, to close certain deals," he said. "That's the argument. It wasn't that he put money in his pocket. The little treasures were never there."

Mr Belloni sought to portray his client as an archetypal Italian family businessman who got horribly out of his depth. "He is a broken man, and worried," he said. "He is convinced that Parmalat should and must be saved. He is anxious about the firm's 35,000 employees."

The Parmalat scandal has reopened bitter divisions between Italy's Finance Minister, Giulio Tremonti, and the Governor of the Bank of Italy, Antonio Fazio. Mr Tremonti has asserted that the Bank had been informed by his ministry of Parmalat's problems well in advance and that they discussed the case together on 8 July - a full five months before the collapse. Mr Fazio flatly denied it. "No warning signals on the Parmalat situation were given to the Bank of Italy by the ministry," he said.

Grant Thornton seeks to avoid Andersen-style melt down

The fallout from the Parmalat scandal for Grant Thornton grew more serious yesterday after two of its senior executives in Italy were arrested and accused of being complicit in the fraud.

Lorenzo Penca, the chairman of the auditor's Italian business, Grant Thornton SpA, and partner Maurizio Bianchi were detained. The firm is auditor to a number of Parmalat subsidiaries that were at the centre of a fraud that was apparently carried out using crudely faked documents.

A Milan judge accused Lorenzo Penca, and partner Maurizio Bianchi of falsely certifying Parmalat's balance sheets and of suggesting ways for the company to commit fraud. Grant Thornton has maintained that it was one of the "victims" of Parmalat's fraud. Yesterday, the firm did not repeat its protestations of innocence but merely said that "the partners of Grant Thornton SpA are moving to address the issues".

Judge Guido Salvini also accused Bianchi and Penca of falsely certifying Parmalat's balance sheets and of having suggested the "fictitious operations necessary to achieve the fraudulent aims of the group". Mr Salvini said the auditors omitted revealing the "irregular situation" of two Parmalat offshore companies, Curcastle and Zilpa. And he said the two also hatched the idea to create the Cayman Islands-based Bonlat subsidiary at the centre of Parmalat's bankruptcy. Mr Penca resigned yesterday.

Grant Thornton has rejected any parallel with Arthur Andersen, the auditor forced to dissolve itself because of its work for Enron, the disgraced former US energy giant.