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    Parmalat Frauds

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    bipulsuman
    Parmalat was a large Italian dairy company that collapsed in 2003 due to a massive accounting fraud scandal. The founder, Calisto Tanzi, grew the company significantly through acquisitions financed by debt in the 1990s. In the early 2000s, losses from new divisions were hidden through fraudulent accounting practices including fake bank accounts. In late 2003, attempts to issue new bonds were derailed when the fraud was discovered, including a $3.95 billion bank account that did not exist. Top executives resigned or were fired and the company eventually declared bankruptcy, resulting in investigations of auditors, executives, and banks involved with Parmalat. The scandal prompted reforms to strengthen financial controls and regulation for public companies.

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    Parmalat Frauds

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    bipulsuman
    454 views19 pages
    Parmalat was a large Italian dairy company that collapsed in 2003 due to a massive accounting fraud scandal. The founder, Calisto Tanzi, grew the company significantly through acquisitions financed by debt in the 1990s. In the early 2000s, losses from new divisions were hidden through fraudulent accounting practices including fake bank accounts. In late 2003, attempts to issue new bonds were derailed when the fraud was discovered, including a $3.95 billion bank account that did not exist. Top executives resigned or were fired and the company eventually declared bankruptcy, resulting in investigations of auditors, executives, and banks involved with Parmalat. The scandal prompted reforms to strengthen financial controls and regulation for public companies.

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    Parmalat was a large Italian dairy company that collapsed in 2003 due to a massive accounting fraud scandal. The founder, Calisto Tanzi, grew the company significantly through acquisitions financed by debt in the 1990s. In the early 2000s, losses from new divisions were hidden through fraudulent accounting practices including fake bank accounts. In late 2003, attempts to issue new bonds were derailed when the fraud was discovered, including a $3.95 billion bank account that did not exist. Top executives resigned or were fired and the company eventually declared bankruptcy, resulting in investigations of auditors, executives, and banks involved with Parmalat. The scandal prompted reforms to strengthen financial controls and regulation for public companies.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    454 views19 pages

    Parmalat Frauds

    Uploaded by

    bipulsuman
    Parmalat was a large Italian dairy company that collapsed in 2003 due to a massive accounting fraud scandal. The founder, Calisto Tanzi, grew the company significantly through acquisitions financed by debt in the 1990s. In the early 2000s, losses from new divisions were hidden through fraudulent accounting practices including fake bank accounts. In late 2003, attempts to issue new bonds were derailed when the fraud was discovered, including a $3.95 billion bank account that did not exist. Top executives resigned or were fired and the company eventually declared bankruptcy, resulting in investigations of auditors, executives, and banks involved with Parmalat. The scandal prompted reforms to strengthen financial controls and regulation for public companies.

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    Download as ppt, pdf, or txt
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    Parmalat's Fraud

    Bipul Suman
    Jaipuria Institute of Management Jaipur

    Gargi Shukla
    R.A. Poddar Institute of Management
    CurrentCurrent
    ScandalsScandals
    o Enron

    o Parmalat – Europe’s Enron (2003)

    o Satyam – India’s Enron (2008)

    o Madoff – World’s largest Ponzi Scheme

    o + 35 other scandals so far totaling $37 Billion


    Company History
    • 1961
    Calisto Tanzi, a 22-year old college dropout, opened a small
    pasteurization plant in Parma, Italy.

    • 1980
    Grown into a multinational corporation diversifying into milk,
    dairy, beverage, bakery and other product lines.

    • 1990
    listed on the Milan stock exchange in, and expanding further
    in the 1990s.
    Principal Divisions
    o Bakery

    o Fresh Foods

    o Milk

    o Vegetables.
    Business of Parmalat
    Type Public
    Founded 1961
    Founder(s) Calisto Tanzi
    Headquarters Collecchio, Italy
    Key people Raffaele Picella (Chairman of the
    board), Enrico Bondi (CEO)

    Industry Food processing


    Products Milk and dairy products, fruit juice, tea
    Revenue €3.940 billion (2008)
    Operating income ▲ €738.8 million (2008)
    Profit ▲ €673.1 million (2008)
    Employees 14,170 (2008)
    Website http://www.parmalat.com/
    Other Social investments undertaken
    where [ Losses Incurred]

    o GermanFormula 1

    o Football Club
    Parmalat across the world
    •Italy •Brazil
    •Portugal •Chile
    •Romania •China
    •Russia •Dominican Republic
    •Australia •Hungary
    •Botswana •Mexico
    •Canada •Spain
    •Colombia •United States of
    •Cuba America
    •Ecuador •Uruguay
    The Founder of Parmalat

    Calisto Tanzi
    People involved in the Scam

    o Former Chief Financial


    Officers(CFO)
    Luciano Del Soldato &
    Fausto Tonna
    Arrest of Calisto Tanzi
    The case of Parmalat
    1997
    o Parmalat jumped into financial markets
    o Financing several companies by acquisitions with debt.

    2001
    o New divisions producing losses.
    o Losses shifted to the use of derivatives.

    2003
    o CFO, FautoTonna announced a new €500 million bond issue.
    o This annoncement of bond issue is surprise for market & CEO (Tanzi)
    o CFO(Tonna)was fired & replaced by New CEO Alberto Ferrari.
    Statements by New CFO

    o In an interview to Time magazine CFO surprise to discovered.

    o He still didn't have access to some of the corporate books.

    o He began making some inquiries and began to suspect that

    o company's total debt >double that on the balance sheet.


    Nov 2003
    o Transaction with Mutual Fund Epicurum

    o And another Cayman-based company linked to Parmalat

    o Both of this transaction shown company some problem with its balance

    o CFO Ferraris resigned

    o Replaced by Del Soldato

    December 2003
    o Unable to get cash from Epicuram Fund for
     Payment of debts and also
     To make bond payment.

    o The CFO Del Soldato resigned

    o Worked for less than 1 month


    Finally
    o Bank of America released a document showing €3.95 billion in bank
    account as a forgery.

    o CEO Tanzi resigned

    o Company officially went bankrupt

    o PM Silvio Berlusconi initiated & appointed Enrico Bondi was called to


    help the company

    o Bondi administer companiy’s rescue


    Who are under investigation
    o Parmalat board members

    o Internal auditors

    o Parmalat executives

    o Deloitte & Touche

    o Grant Thornton

    o Bank of America

    o Lawyer Bank of America's Italian unit

    o Deloitte & Touche

    o Grant Thornton
    Parmalat scam’s impact w.r.t
    companies:
    o To Revise Company Law Directive on the Statutory Audit
    function.

    o It will strengthen controls over the audit profession.


    o Full group auditor responsibility for consolidated accounts of a
    group of companies.

    o Obligatory independent audit committees for listed companies.

    o Stricter auditor rotation requirements

    o Strengthened sanctions
    Queries????????
    Thank You

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