Parmalat SpA, an Italian dairy and food company and Europe's biggest dairy company, was declared bankrupt in late 2003. Its worldwide operations include almost 140 production centers. Over 36,000 workers around the world collect Parmalat pay packets, and 5,000 Italian dairy farms are dependent on the company for the bulk of their business.
In 1961, Calisto Tanzi, a 22-year old college dropout, opened a small pasteurisation plant in Parma, Italy. Four decades later the company had emerged into a multinational corporation diversifying into milk, dairy, beverage, bakery, and other product lines in the 1980s, becoming listed on the Milan stock exchange in 1990, and expanding further in the 1990s.
The post-listing expansions include:
- Expansion into thirty countries from six in 1990
- Parma A.C.
- Tanzi's son Stefano, president and Parmalat board member
- ParmaTour - travel group (bankrupt, sold)
- Francesca - chief executive
- TV network, Odeon TV (sold)
In 1999, Parmalat set up a subsidiary in the Cayman Islands called Bonlat. The first indication of financial problems came in early 2003 as the company tried to sell 500 million euro in bonds. After this CFO Fausto Tonna resigned in March replaced by Alberto Ferraris.
The crisis became public in November when questions were raised about transactions with mutual fund Epicurum, another Cayman-based company linked to Parmalat causing its stock to plummet. Ferraris resigned less than a week later replaced by Luciano Del Soldato.
In December, Del Soldato resigned, unable to get cash from Epicurum fund, needed to pay debts and make bond payments. Enrico Bondi was called in to help the company. Tanzi himself resigned as chairman and CEO. Parmalat's bank, Bank of America, then released a document showing 3.95 billion euros in Bonlat's bank account as a forgery.
Italians were shocked that such a vast and established empire could crumble so quickly.
Among the questionable accounting practices with which Parmalat cooked the books: it sold itself credit linked notes, in effect placing a bet on its own credit worthiness in order to conjure up an asset out of thin air.
Other Financial Issues
After his arrest, Tanzi reportedly admitted during questioning at Milan's San Vittore prison, that he diverted funds from Parmalat into Parmatour and elsewhere. The family football and tourism enterprises were financial disasters; as well as Tanzi's attempt to rival Berlusconi (another rags-to-riches Italian success story) by buying Odeon TV, only to sell it at a loss of about 45 million euro.