Parmalat founder questioned

Italian magistrates questioned Parmalat's founder, his son and his niece yesterday after the arrested patriarch admitted misappropriating hundreds of millions of euros from the family-controlled food group.

Magistrates believe founder Calisto Tanzi falsified accounts at Italy's eighth-biggest industrial group for years, pushing the firm into insolvency with debts that prosecutors have put at 10 billion to 13 billion euros ($12.5-16.2 billion).

The 65 year-old Tanzi told investigators on Monday he had funnelled around 500 million euros away from Parmalat and into other firms, including Parmatour, a family-run tourism company.

"We will now have to analyse the flow of cash (of these companies) one by one to see how it came in, how it came out and where it went," Mr Tanzi's lawyer Fabio Belloni told reporters as he entered Milan's San Vittore jail where his client is detained.

As the investigation into the scandal spread, magistrates in Mr Tanzi's home town of Parma questioned his son, Stefano, and his niece, Paola Visconti.

It was the first time magistrates talked to the pair, both of whom are Parmalat board members.

Magistrates, who believe Calisto Tanzi embezzled more than €800 million from his global food empire over the past decade, grilled him for a third day running yesterday at the gloomy San Vittore jail.

The billions of euros missing from Parmalat's books have prompted comparisons with the bankruptcy of US energy trader Enron two years ago and raised questions about the effectiveness of Italian regulators, banks and international ratings agencies.

The US Securities and Exchange Commission said on Monday it was filing a suit against Parmalat seeking substantial fines, accusing the group of misleading bond investors in "one of the largest and most brazen corporate financial frauds in history".

Among some 20 people under investigation in the case are the chairman and a partner of auditing firm Grant Thornton SpA, accused by prosecutors of helping Parmalat organise a web of offshore companies that concealed the firm's losses.

Grant Thornton International has begun an internal investigation into Grant Thornton SpA, its Italian affiliate, while the unit's executives have denied any wrongdoing.

No one has been charged in the case. Parmalat's balance sheet to September 30 showed debts of about six billion euros, but Mr Tanzi's arrest warrant, drawn up by Milan prosecutors, said the debt might top 13 billion euros.

Sources at Parmalat, which is under the control of government-appointed administrator Enrico Bondi, said it was too soon to speculate about the scale of the debts.

The stricken company issued a statement yesterday to reassure Italian farmers that it could continue to pay them for dairy products despite the crisis.

Judicial sources said yesterday that Mr Bondi had formally presented himself as an injured party in the scandal, enabling the new management to claim damages from Mr Tanzi, who quit as Parmalat's chairman and chief executive two weeks ago. The rescue management team was granted bankruptcy protection from creditors on Saturday, giving it two years to work out its daunting problems.

Parmalat until a week ago was a blue chip on Milan's bourse but its shares are now worth next to nothing and have been suspended from trading indefinitely.