ENRON, TYCO, WORLDCOM, AHOLD, PARMALAT:
Who is next on the bankruptcy list?

Michel Porcheron

The meteoric rise of 65-year-old Calisto Tanzi, Parmalat's "big 
chief" since 1961, sponsor of antiquities, symbol of the "clean 
hands" years in Italy, ended last December 27 in a cell in 
Milan's San Vittore prison. Currently accused of "criminal 
association with a view to pleading fraudulent bankruptcy".

Tanzi was the least well-known of Italy's great tycoons. The 
least famous and a far cry from the notorious Agnelli, Benetton, 
Barilla or Berlusconi. Could it be that "Don Calisto", with only 
a simple diploma in accountancy to his name, was a discrete man, 
more interested in attending church in Parma every Sunday than 
appearing in the high society sections of the Italian press?

It's possible. More than just discrete, this man donned a cloak 
of secretiveness years ago only comparable to the opacity 
attributed to his business ventures today. His story is at once a 
veritable economic disaster and a debacle; a huge financial 
scandal of worldwide significance.

A "European Enron", according to Giulio Tremonte, Italy's economy 
minister, who has affirmed that the fraudulent bankruptcy claim 
by the Italian dairy magnate will cost the national economy the 
equivalent of 11 billion euros, or almost one percent of the 
country's Gross Domestic Product.

For the last 15 years, Calisto Tanzi himself and his right-hand 
man Fausto Tonna, the company's financial director, have been 
painstakingly falsifying Parmalat's accounts.

An audit office responsible for controlling the accounts of the 
company — with businesses valued at 7.6 billion euros in 2002 
(70 percent of that total linked to exports) in 30 different 
countries, covering 146 industrial installations and employing 
36,000 in Portugal and the United States, Brazil, Argentina and 
Venezuela — revealed numerous financial discrepancies 
representing a gaping hole where 10 billion Euros should have 
been. Peanuts!

Whatever the rescue plan may be for this food production empire -
- now under the control of special administrator Enrico Bondi — 
the central issue on the table at the moment is one of control, 
or rather lack of control, of such a huge industrial group as 
this (in this case directed by one family).

The problem "is derived from the failure of the trusteeship's 
authorities and the traditional intermediaries, receivers, 
accountants, administrators, bankers, notaries and audit 
offices", commented Bruno Abescat to French weekly L'Express.

In reality, no one saw or attempted to see or detect the fraud 
that allowed Calisto Tanzi to divert hundreds of millions of 
euros for personal ends, the gigantic embezzlements, false 
accounts, and more or less fraudulent subsidiaries comfortably 
installed in tax havens such as the Cayman Islands, the Dutch 
Antilles and Luxembourg.

"Parmalat's accounts are filled with virtual operations, such as 
an imaginary 300,000-ton consignment of powdered milk to Cuba or 
the fictitious license for the Santal brand of fruit juices in 
the United States", reported French daily Le Monde's permanent 
correspondent in Milan last January 10.

With the first cracks, discovered in mid-November, the calves, 
cattle, pigs and eggs all disappeared, just like in Jean de la 
Fontaine's milkmaid fable. Perrette, the milkmaid in the tale was 
a dreamer who let her imagination run away with her. Was Tanzi a 
dreamer? What moved him?

To date, that is an unknown. What is certain is that the Italian 
giant — the third largest manufacturer of European dairy 
products after the Swiss firm Nestli and French group Danone, has 
come tumbling down like a house of cards. No one seems to have 
learned their lesson from the Enron case.

"This crash goes beyond the imaginable. It is incomprehensible 
that, for years, a highly-valued group on the Stock Exchange was 
accumulating debts trimester after trimester and was able to 
continue engaging in unprofitable activities and getting up to 
its eyeballs in debt", comments Fabricio Onida, professor of 
International Economy at Milan's Bocconi University.

It was not until December 19 that the Bank of America, judge and 
jury, revealed that Bonlat, Parmalat's subsidiary in the Cayman 
Islands, did not in reality possess a four-billion euro account. 
The U.S. bank logo that appeared on its documents was a fake. And 
that was how the scandal that has captured the attention of the 
world's press today first began.

Currently, the Italian judicial system is searching for fresh 
funds in order to compensate employees and suppliers, without 
even taking into account the 70,000 holders of the Parmalat name 
and the 40,000 shareholders who will be coming forward to reclaim 
their investments.

The Parmalat scandal is both simple — yet another example of 
capitalist financial abuse — but also a complex labyrinth. It 
could easily be the greatest company scandal of all time.

For more than a decade, those who were in the know were using 
complex methods to deceive shareholders who couldn't possibly 
have imagined what was really going on, affirmed William Lerach, 
a specialist US lawyer.

But not long after the news of the scandal broke, after the first 
series of arrests, searches and interrogations, it is already 
possible to establish an initial provisional inventory, an 
apparently heteroclite list of participants more or less 
connected to Parmalat's bankruptcy, accused or naturally subject 
to investigation on account of their working practices.

Included amongst them, to mention but a few, are Citigroup, an 
advisory bank that organised various offshore societies; several 
credit banks, some of them Italian (Capitalia, Intesa, San Polo 
IMI) or of other nationalities (Deutsche Bank and Banco Santander 
Central Hispano); Standard & Poor's, a financial notary agency; 
accountancy offices such as Grant Thornton and Deloitte & Touche 
Tohmatsu; international investment companies such as Morgan 
Stanley, JP Morgan Chase, etc. A jigsaw puzzle that is both 
distinguished and awesome.

The scandal has reached the SEC (Security and Exchange 
Commission) and the US Stock Exchange and there will be 
considerable consequences in Latin America as a result.

In order to enter the Parmalat labyrinth and understand the 
mechanisms of the scandal, one would need to find a dictionary 
with all the latest terminology from the stock exchange and a 
geographical atlas that clearly depicts the most miniscule 
islands that serve as refuges, provisional or otherwise, for the 
billions of banknotes in circulation.

"Regarding the Parmalat scandal, more remains to be discovered 
than has been discovered", affirmed Rocco Buttiglione, the 
Italian minister for community policies, on January 22.

Investigators have already discovered, amongst other oddities, 
that the head of Parmalat's telephone operators was the general 
director of 26 or 30 of the group's subsidiaries.

And what is to become of the celebrated football club, Parma AC, 
twice-UEFA Cup champions and bought up by Parmalat in 1990?

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Granma Weekly Cuba (abridged)