In response to the corporate scandals in US, a French lawyer, Sophie L'Hélias, said, "This could never happen here (Europe); such greed is limited to America". Parmalat, the Italian dairy and food giant, has proved that there are no continental barriers to corporate scandals. Parmalat is not the first European scandal. Royal Ahold (a Dutch company), Vivendi Universal, and Fininvest are few other companies which were under investigation for accounting impropriety. However, the magnitude of suspected losses of Parmalat has provoked a fresh debate over European corporate governance.
Started as a small family-owned business, Parmalat has grown into the largest food conglomerate. It is Europe's largest dairy products group with 36,000 workers employed in 30 countries. It all started in February 2003, with the withdrawal of 300-500 million euro bonds, announced just a day earlier, citing unfavorable bond and equity market conditions. Subsequent events such as replacement of long-standing Finance Director Fausto Tonna by Alberto Ferraris, and the claim of the company that nearly €500 mn existed in the little known Epicurum fund triggered concern among the bond holders about the €2.45 bn of bonds due in the coming years. Later in December, the report of inability of the company to encash its investment in Epicurum raised the concerns of investors. As rightly described by analyst Andrea Paladini at Centrosim in Milan, Epicurum was just the tip of the iceberg. The fraud was unveiled on December 19, 2003 when Bank of America issued a statement that the purported $4.8 bn bank account held by Bonlat did not exist. |
