Parmalat founder questioned in probe

Dec. 19, 2003, 9:27 AM EST / Source: Reuters

Italian prosecutors questioned the founder of food group Parmalat on Sunday for suspected fraud and misappropriation of hundreds of millions of euros, and prepared to ask for his formal arrest, judicial sources told Reuters.

Calisto Tanzi, the wealthy head of Italy’s eighth-biggest industrial group until less than two weeks ago, spent the night in a jail cell after authorities seized him on a Milan street on Saturday evening and took him into custody, they said.

“It’s a difficult time for him, but they’ve arranged things well for him,” Tanzi’s lawyer, Fabio Belloni, told reporters outside San Vittore prison before prosecutors from Milan and Parma, near Parmalat’s headquarters, questioned the executive.

After two hours the two Milan magistrates left the jail and told reporters they would seek a judge’s order to convert Tanzi’s provisional detention, which can last no more than 48 hours, into a formal arrest.

Judicial sources said the prosecutors would present the request on Monday to a judge, who would decide by that evening whether Tanzi should be formally arrested.

Parma investigators continued to question Tanzi. He has not been charged with any crimes.

One of the magistrates, Carlo Nocerino, said Tanzi’s health, which has been the subject of speculation, seemed good.

The media-shy Tanzi, 65, is at the center of a criminal investigation into suspected fraud at Parmalat, which has raised far-reaching questions about the conduct of the company’s senior managers, its auditors and banks.

The scandal erupted earlier this month when Parmalat, which has 35,000 employees in some 30 countries, revealed a hole in its accounts that investigators said could top 10 billion euros ($12.4 billion).

Italy’s biggest corporate crisis in more than a decade threatens billions of euros of investments by holders of shares and bonds, as well as some two billion euros in bank loans.

One-time jewel
In a day of reckoning on Saturday, Parmalat, now headed by a government-appointed rescue administrator, was declared insolvent by a Parma court, hours before Tanzi was detained.

Insolvency allows Parmalat to remain in operation and to continue paying workers, dairy farmers and suppliers, putting thousands of financial creditors on hold while it draws up a recovery plan within six months.

The court’s insolvency order also triggered a mandatory investigation into fraudulent bankruptcy, which carries a penalty of up to 10 years in jail, stiffer punishment than for the suspected offences already under investigation.

Public prosecutors have named about 20 people in the fraud probe, including current and former employees of the group as well as unnamed outside auditors.

Investigators said people questioned so far have told of a complex web of offshore shell companies hiding losses for more than a decade and overseen by senior executives.

Judicial sources told Reuters that investigators were probing whether Tanzi had misappropriated some hundreds of millions of euros of Parmalat funds. This week authorities sealed off the family’s holding company, Coloniale, which controls Parmalat.

As a young man Tanzi dropped out of college, then in 1961 took over a dairy plant and steadily built it into a global food group — a leader in long-life milk, the number-three U.S. cookie maker and a jewel in Italy’s industrial crown.

Tanzi was detained in Milan four days after prosecutors sought him for interrogation and discovered he had unexpectedly left Italy.

Local news reports said he had been in Geneva before returning to Italy on Saturday, when he was seized while leaving his lawyer’s office and getting into his chauffeur-driven Mercedes.

Reports said he told authorities after being detained on Saturday and confronted with a list of alleged Parmalat overseas shell companies: “I know nothing of these.”

The reports said that later, while being transferred to prison for the night, Tanzi waved to journalists from a police car and said, “Ciao.”

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