Parmalat, the Italian dairy company that plunged into bankruptcy by massive accounting fraud, on Wednesday agreed to a sweeping overhaul of its corporate governance as part of a deal with U.S. regulators.
The deal will see Parmalat, once it emerges from reorganization, will implement a number of governance initiatives demanded by the latest stringent U.S. business rules. Some changes will go further than the rules mandate.
The Securities and Exchange Commission announced in turn that it had settled its lawsuit against Parmalat related to wrongdoing in the offering of more than $1 billion in bonds to investors in the United States.
Parmalat, without admitting or denying wrongdoing, as is usual in SEC cases, agreed to a permanent injunction against its committing future breaches of securities laws as well as to the governance plan.
People close to the Italian company confirmed that the deal had been negotiated with Enrico Bondi, the extraordinary administrator juggling the demands of creditors and regulators, and trying to help the company emerge from restructuring next year.
Major overhaul
Parmalat will have new bylaws after its reorganization that ensure that all its directors are elected by shareholders and that a majority are independent.
The board will have the duty to review and approve all strategic, industrial and financial plans of the company. It will also have to approve all transactions that could have a material effect on operations.
The roles of chairman and chief executive will be split.
There will be a code of conduct for directors and an internal control and governance committee reporting at least twice a year to the board. And a code of ethics will be adopted.
Parmalat has agreed that without subpoena, but subject to some legal privilege, it will make its officers, employees and documents available for scrutiny on request.
Parmalat, the SEC said in an amended suit released along with the settlement on Wednesday, "engaged in one of the largest financial frauds in history" from at least 1997 to the end of 2003.
The SEC, which has oversight of Parmalat because its shares are listed in the United States and because it offered and sold debt securities in the United States, stressed that its investigation of fraud was continuing. It has not yet brought any cases against individuals.
