Parmalat sues Bank of America, says it helped hide insolvency

Italian food giant seeks to recover $10 billion that allegedly was lost

October 08, 2004|By BLOOMBERG NEWS

ASHEVILLE, N.C. - Parmalat Finanziaria SpA Chairman Enrico Bondi is suing Bank of America Corp., seeking to recover more than $10 billion that he said was "diverted, squandered or taken" from the food maker, which filed Italy's biggest bankruptcy after collapsing in December.

The third-largest U.S. bank helped senior Parmalat managers create "financial transactions that were deliberately designed to conceal Parmalat's insolvency," Bondi, 70, said in his complaint, which was filed yesterday in federal District Court in Asheville.

Acted `deliberately'

"Bank of America and the culpable Parmalat insiders deliberately structured these transactions to create the false impression to the world at large that Bank of America was lending hundreds of millions of dollars to various Parmalat entities, falsely indicating that Bank of America had done its due diligence and that these entities were creditworthy, financially stable enterprises," Bondi's complaint said.

The lawsuit is the fifth that Bondi has filed against lenders and former auditors of the company, which sought bankruptcy protection after disclosing in December that a 3.95 billion-euro bank account at Bank of America didn't exist.

"Bank of America had absolutely no role in disguising Parmalat's true financial condition," bank spokeswoman Susan Beard said in an e-mailed statement. "We had no reason to doubt Parmalat's financial statements, which showed substantial profits and which had been audited by internationally recognized accounting firms, and no reason to doubt the validity of the investment-grade rating awarded by Standard & Poor's."

Earlier, she had said the company would defend itself vigorously against the allegations.

Bank of America raised more than $1.7 billion for Parmalat through a series of private placements and loans beginning in 1997, the lawsuit says. The bank sold $1.3 billion in debt to U.S. investors, including John Hancock Financial Services Inc.

Bondi, as Parmalat's government-appointed administrator, has been suing banks and rejecting many of their debt claims, often alleging they were aware of the company's true finances when they raised money for the maker of Sunnydale Farms milk. He has denied 74 percent of 5.7 billion euros in compensation requests from lenders, including 339 million euros claimed by Bank of America, which is based in Charlotte.

Big payment

Banca Intesa SpA, Italy's largest lender, agreed Wednesday to pay Parmalat 160 million euros to avoid legal action over a bond sale by Nextra, its fund management unit, several months before Parmalat collapsed.

Bondi initiated his legal actions July 29 when he sued Citigroup Inc. for unspecified damages, alleging in a suit filed in Hackensack, N.J., that the world's biggest bank was "an integral part" of financial manipulations that led to $10 billion in Parmalat losses.

Since then, Bondi has filed suits in Parma, Italy, seeking to recover 290 million euros from UBS AG, 248.3 million euros from Credit Suisse First Boston, and 17 million euros from Deutsche Bank AG for work they did before Parmalat collapsed.

All of the banks and accounting firms have denied any wrongdoing.

Bondi said the company's debt ballooned to more than $16 billion after more than a decade of accounting fraud hidden by more than $10 billion in borrowing.

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