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Ex-head of Parmalat jailed for 18 years

December 9, 2010

By Guy Dinmore in Rome, Published: December 9 2010

Calisto Tanzi, former chief executive of Italy’s Parmalat dairy company, which collapsed in 2003 with €14bn ($18.5bn) of debts, was sentenced to 18 years in jail on Thursday for his role in what at the time was Europe’s biggest corporate bankruptcy. A court in the northern town of Parma found Mr Tanzi, 72, guilty of fraudulent bankruptcy and criminal conspiracy. Fausto Tonna, former finance director, was handed a 14-year jail sentence and 13 other former executives were also found guilty while two were acquitted.

“I did not expect such a severe sentence,” Mr Tanzi said afterwards. His lawyers, quoted in the Italian media, said they would appeal. Prosecutors had asked for a 20-year jail sentence. The trial began in early 2008, with 56 originally accused.

Mr Tanzi in May lost his appeal against a separate 10-year sentence passed two years ago by a Milan court that found him guilty of falsifying accounts, market rigging and misleading investors and market regulators. He subsequently launched a final appeal.

The collapse of Parmalat, dubbed “Europe’s Enron”, rocked the Italian and European corporate worlds when in late 2003 it admitted an account it claimed to have held at Bank of America with €4bn was fake. Investigations revealed that the relatively small dairy group, with operations in the US, Europe and Latin America, had been misleading investors about its true financial health for years.

Italian pensioners were among more than 100,000 shareholders who lost their life savings in the collapse.

The Parma court also ordered the defendants to pay €2bn in compensation to the new Parmalat which was restructured under the administration of Enrico Bondi. Mr Bondi refloated the company on the Milan stock market in 2005 and has successfully recovered more than €2bn in out-of-court settlements with several banks, including Morgan Stanley and the former Merrill Lynch, now owned by Bank of America.

The Parma court, following a similar ruling passed by the Milan appeals court in May, also ordered the defendants to pay compensation to a committee of creditors who had filed for civil damages.

At the time of the Milan ruling, the head of the committee said it was a “sensational victory” but that he did not expect the money to be returned.

The case took a new twist in 2007 when investigators seized art works belonging to Mr Tanzi valued at more than €100m.

More pieces of art were seized this year.

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