Archie's Corner

[jmhollen]

SEC to work in Italy on role of banks
By Paul Betts in Milan and Tony Barber in Rome
Published: January 3 2004 4:00 / Last Updated: January 3 2004 4:00

The US Securities and Exchange Commission is to work with Italian magistrates and step up investigations into the role of international and Italian banks in financing Parmalat's expansion in the past few years, judicial sources and people close to the company said yesterday.

The inquiries will form part of a widening probe into the scandal at the insolvent food group, whose former chief executive, Calisto Tanzi, is to undergo further interrogation today at the Milan prison where he has been held since December 27.

Fausto Tonna and Luciano Del Soldato, two of Mr Tanzi's former chief financial officers, were questioned by a Parma judge yesterday, two days after they were arrested along with five others on suspicion of falsifying Parmalat's accounts.

The two men, who have not been formally charged, told Pietro Rogato, the judge, that it was Mr Tanzi who controlled Parmalat, and that they had merely carried out instructions, according to judicial sources.

The SEC, which sent an investigator to Italy this week, is particularly interested in the US banks.

International banks placed 80 per cent of the €7.8bn ($10bn) worth of bonds issued by Parmalat since 1997. JP Morgan Chase, Merrill Lynch and Morgan Stanley accounted for about 40 per cent of the total.

The US regulator is also beginning to study ways of preventing a repeat of the Parmalat scandal. It is considering imposing the same rigorous requirements for US banks doing business outside Europe as those introduced in the US after the Enron and other big corporate scandals, according to people close to the Italian magistrates and Parmalat.

Guido Piffer, one of the Milan magistrates, yesterday said investigations were needed to clarify "the role of the credit institutions which granted the group credits despite a precarious market situation".

At the same time, Citigroup, one of the US banks most exposed to the Parmalat affair, is proposing to act as go-between in any future negotiations with Enrico Bondi, Parmalat's government-appointed administrator, and the international banking community that did business with Parmalat, a Milan banker disclosed.

Between 1997 and 2002, Bank of America was the most active in organising private placements for Parmalat in the US market, sponsoring more than $500m worth of transactions, followed by JP Morgan Chase, which sponsored over $120m worth in private placements.

Meanwhile, doctors examined Mr Tanzi after his lawyers asked magistrates to consider granting their client house arrest pending his formal indictment because of his heart condition. Mr Tanzi was denied house arrest by one judge earlier this week.

A heart specialist sent by the Tanzi family to supervise the examination by the two court-appointed doctors, said the 65-year-old Parmalat founder was "worn out".