Course:MGMT405 2022W2/Case-2ii

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Parmalat is a global Italian dairy and food company founded in 1961 by Calisto Tanzi. The company has grown to be one of Italy's largest corporations and one of the world's largest long-life producers of milk. It is controlled by the Lactalis group since 2011 [1] and provides a large range of dairy and fruit products to over 200,000,000 consumers worldwide [2]

Range of products offered by Parmalat

What Happened?

In 2003, Parmalat became the center of the largest financial fraud in European history. The scandal was exposed when the company defaulted on its €150 million bond issue.[3] Parmalat's creditors quickly discovered that the company's financial statements were false, revealing that the company's management had created an intricate system of offshore companies to hide the true extent of its liabilities. Parmalat allegedly created a fake bank account and used it to move money out of the company. The company also falsified bank documents showing it had large cash reserves.[3] In fact, Parmalat's bank account was almost empty and the company was in serious financial trouble.

This fraud was a result of Parmalat's corrupt culture and poor corporate governance. The company's founder, Calisto Tanzi, was deeply involved in the day-to-day management of the company and was known for his positive business practices. He had close ties with Italian politicians and used his connections to secure cheap loans for Parmalat.

The scandal caused Parmalat's share price to plummet and the company to go bankrupt. The Italian government intervened to prevent the company from collapsing and Parmalat was eventually reorganized under new management. [4]

The Parmalat scandal had a huge impact not only on the company, but also on the Italian business world. The scandal has highlighted the need for improved corporate governance and increased transparency in Italian financial markets. It also exposed weaknesses in the Italian banking system, with multiple banks involved in fraud. [3]

In summary, the Parmalat scandal was a stark reminder of the dangers of corporate fraud and the importance of effective corporate governance. The scandal underscored the need for greater transparency and accountability in business and highlighted the importance of strong regulation and oversight of financial markets. Although the impact of the Parmalat scandal was significant, it ultimately led to reforms that made Italy's financial markets stronger and more resilient.

Key Players/Who was Most Responsible?

Calisto Tanzi - CEO

Calisto Tanzi

Calisto Tanzi was the CEO of Parmalat and ran the company and not only knew about the problems but also was the one who decided to hide them[5]. Tanzi was able to build a corporation of directors, management, auditors, banks, and investors and align their views to cover up debts and create false accounts. Tanzi is known to be the biggest player in this fraud case.

Tanzi had little knowledge of the company's financial condition and acquired many companies in the food industry which created major losses for the company. With the help of auditors, other executives, and banks, Tanzi was able to misappropriate over €1 billion for personal gain[3].

Tanzi created a business plan with Fausto Tonna to misappropriate assets through many deceitful tactics[3].

Fausto Tonna - CFO

Fausto Tonna was the CFO of Parmalat during the majority of the fraud. Tonna worked with Tanzi on many of his business schemes and came up with the double billing scheme that inflated Parmalat's revenue and assets[3]. Tonna although in charge of the Financial side of the company was completely dependent on the internal auditor of the company who was the only person who handled the books.

Directors, Management and Executives

All people within the management of Parmalat that were involved or knew of the scandal were the Directors, Management and Executives. According to a Parmalat employee as many as 300 people knew of the double-billing scheme and chose to remain silent as the fraud continued to grow[3]. Tanzi going against the Italian Government rules was able to build a system that he had complete control over.

Against SOX rule at least half of directors must be independent, of the seven Executive Directors only 2 were independent[3]. The executive directors worked hands-on with the company and received compensation for their involvement. The internal directors, although independent of the company, didn't question the company's malpractices[3].

Senior Management had little communication with the executive directors and was unable to act efficiently in minimizing the risk of the company[3].


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Many auditing firms were involved with Parmalat in order to misrepresent their assets. The company that played the biggest role was Grant Thornton International. Grant Thornton International was Parmalat's primary Auditor until 1999 when Deloitte was brought in as the replacement primary auditor but kept Grant Thornton to audit their offshore affiliates[3]. This was done in order to work around the Italian Government law. Grant Thornton conspired with Tanzi and Tonna in order to cover up the fraud from Deloitte and was directly involved in the creation of a false sale of €300 million to the Cuban Government[3]. Grant Thornton additional knew about the massive "hole" of €5 billion in Parmalat's bank account and noted and questioned Tanzi about it in 1997[3]. Deloitte although may not have been directly involved in committing the Fraud was in a position in which they should have detected it or addressed the accounting practices.


Many banks were directly involved in the Parmalat case by covering up losses and granting loans on false assets[3]. Parmalat's post-bankruptcy CEO Enrico Bondi filed suits against 45 banks as he believed that they helped aid in covering up assets[3]. These suits incriminated banks such as UBS, Bank of America, JPMorgan Chase, Swiss Bank and many others. UBS and Swiss Bank denied any wrongdoing while the Bank of America's head of corporate credit in Italy, Luca Sala admitted to misappropriating $27 million dollars for the company[3]. Parmalat was able to obtain loans by falsifying their accounts by duplicating invoices to increase accounts receivable and reported revenues[3]. Banks such as the Bank of America also gave higher ratings on Parmalat bonds based on known to be fake accounts[3].

Italian Government - CONSOB - SOX

The Italian Government played a vital role in the Parmalat scandal. Allowing Tanzi to get more and better loans and by not enforcing on auditor and director shifts. The securities exchange regulatory agency (CONSOB) of Italy was under-financed, powerless and put all of its funding into a war with the Bank of Italy[6]. CONSOB was inefficient in enforcing accounting rules and principles, therefore, allowing Fraud to go unnoticed.

Impact on Key Stakeholders

At the time of the crisis, Parmalat listed 214 subsidiaries in 48 countries with over 36,000 employees [3]. As such, the key stakeholder groups were impacted on both a domestic and international scale. As discussed below, the impact on these key stakeholders emphasizes the weight that the crisis had on so many groups of people.


In Italy alone, over 15,000 employees faced uncertainty with regard to the viability of their career with Parmalat [4]. While the Italian Government put measures forward to allow for operations to continue, the stresses placed on employees due to restructuring and declining confidence in the company negatively impacted these stakeholders. International employees were also impacted by this crisis, In Brazil, over 100 employees were laid off from Parmalat's Sao Paulo headquarters as a result of lower operational activities from the financial crisis [7]. This emphasizes the large impact that Parmalat's actions had on a global scale.


The global impact of the crisis was especially pertinent to Parmalat's suppliers. As Parmalat buys 8% of Italy's milk from producers, many farmers became concerned with regard to the company's ability to fulfill long-standing contracts and meet payment obligations [8]. As a result, many Italian farmers began to rally, demanding financial aid and blocking major motorways to protest the crisis [8]. Additionally, Parmalat was the second-largest buyer of fresh milk in Brazil, buying 1/4 of the milk produced there [8]. Consequently, the crisis left many Brazilian suppliers to struggle as Parmalat placed delays on payment obligations and milk prices dropped due to decreased demand [9].

Shareholders and Investors

Parmalat stock price fluctuations from 2002 to 2004

Shareholders and Investors in Parmalat were misled for many years due to the consistent optimism expressed by bond analysts in terms of putting forward "Buy" and "Hold" ratings during the time of the crisis [3]. Following the crisis, Parmalat's bond rating was significantly downgraded, and its stock price fell by 40% in subsequent days [3].

Italian Government

As Italy's largest food company at the time, Parmalat contributed significantly to Italy's Gross Domestic Product through its exportation of goods and employment opportunities [3]. Given this, the downfall of the company toward insolvency called the government into action to prevent an economic downturn in the country. Through this, the Italian Government implemented an emergency government decree to help save jobs and keep Parmalat on its feet [8].

External Auditors

Parmalat's external auditors leading up to the crisis, Grant Thornton, were accused of assisting the company in hiding offshore affiliates and covering the large gap in terms of the existence of over €4 billion in cash missing [3]. Two Grant Thornton auditors involved with the Parmalat crisis were sentenced to jail in Italy, thus negatively impacting the reputation of both the auditors and the auditing firm as a whole [10].

Concluded Lawsuits

After Tanzi stepped down as CEO, Enrico Bondi stepped into Parmalat as the next CEO to help Parmalat recover as a company. Bondi continued to make settlements through litigation to recover some of the debt Parmalat had accrued. Following the scandal of Parmalat, the company was seeking $10 billion, as it claimed that was the value of damages incurred due to the negligence of multiple companies. The key companies that Parmalat was suing were accounting firms Deloitte and Grant Thornton, and banks Citigroup, Bank of America, and JPMorgan Chase[11].

Concluded Lawsuits
Accounting Firms
Deloitte In January 2007, Deloitte agreed to pay Parmalat $149 million to settle the allegations of their involvement in the fraud[12]. As part of the settlement, Deloitte avoided admitting to any wrongdoing. Parmalat claimed that Deloitte's negligence contributed to the collapse of the company in 2003[13]. Deloitte responded by filing a counterclaim for fraud and breach of contract. While they claimed that they were actually the victim in the case, they ultimately settled for the aforementioned $149 million.
Grant Thornton Grant Thornton was also included in the original lawsuit of $10 billion for allegedly overlooking fraud that led to the downfall of the original Parmalat[14]. After 10 years without a resolution, Grant Thornton finally got the accusations made against them dismissed[15]. Despite getting this lawsuit dismissed, Grant Thornton, alongside Deloitte, was still required to pay a settlement to US investors in 2009. The class action lawsuit cost Grant Thornton $6.5 million with an additional $8.5 million paid by Deloitte.
Bank of America In addition to suing the auditing firms, Parmalat also claimed many banks were at fault. One of the settlements was by Bank of America. In July 2009, Bank of America paid $100 million for helping perpetuate the fraud[3]. Similarly to the accounting firms, the bank stated no one in the company knew or could have known what was happening at Parmalat[16].
JPMorgan Chase On October 29, 2015, JPMorgan Chase made a similar settlement to Bank of America for $47 million[17].
Citigroup Unlike most banks, Citigroup refused to settle[18]. Citigroup also filed counterclaims, and in 2014 the bank received $431 million in shares of the new Parmalat[18]. Following years of appeals, Italy's Supreme court finally ruled on April 16, 2019, that Citigroup will be able to claim the shares which increased in value to $1.098 billion at the date of the decision[19].

Current Status of the Case

As the scandal happened 20 years ago, all the high-profile lawsuits have been settled. Litigation has happened and Parmalat is operating as a new company under the same name. The individuals at fault are either serving or have completed their sentences.

Where is the Company Now? Where are the Key Stakeholders Now?



After Tanzi stepped down as CEO, Enrico Bondi stepped into Parmalat as the next CEO to help Parmalat recover as a company. Bondi continued to make settlements through litigation to recover some of the debt Parmalat had accrued. in 2007, Deloitte paid Parmalat $149 million for their involvement in the fraud[20]. In July 2009, Bank of America paid $100 million for helping perpetuate the fraud[3]. In 2013, Grant Thornton successfully dismissed their case and did not need to pay Parmalat for perpetuating the fraud [21]. However, Grant Thornton and Deloitte did pay an additional $6.5 and $8.5 million respectively to US investors in a class-action lawsuit in 2009 [21].


After being delisted in December 2003 from the fraud being discovered, Parmalat is relisted on the Milan exchange in 2005[3]. In July 2011, the French dairy group Lactalis bought 54.3% of Parmalat's stock in a $3.6 billion buyout while already owning 29%, bringing the total ownership to 83.3%[22]

Key Players

Calisto Tanzi

Calisto Tanzi was arrested in December 2003 and sentenced to 18 years in prison[3]. On January 1st, 2022, Tanzi died from pneumonia at the age of 83 in Parma[23].

Fausto Tonna

Fausto Tonna was arrested in December 2003 and initially sentenced to 2.5 years but allowed to work with social services instead of being in jail[24]. However, in 2021, Tonna returned to prison to serve his final sentence for 8 more years.[25]

Luciano Del Soldato

Former CFO and financial executive of Parmalat, Luciano Del Soldato was arrested in December 2003 and sentenced to serve 1 year and 10 months but given the option to work with social services[24]

Gian Paolo Zini

A lawyer for Parmalat, Gian Paolo Zini was sentenced to 2 years but also given the option to work with social services[24].


  1. "About Lactalis". Lactalis. n.d.
  2. "Who We Are". Parmalat. n.d.
  3. 3.00 3.01 3.02 3.03 3.04 3.05 3.06 3.07 3.08 3.09 3.10 3.11 3.12 3.13 3.14 3.15 3.16 3.17 3.18 3.19 3.20 3.21 3.22 3.23 3.24 3.25 3.26 Rimkus, Ron (November 29, 2016). "Parmalat". Econ Crises.
  4. 4.0 4.1 Sverige, Chris (April 17 2004). "The Parmalat scandal and globalization: impact on the Italian economy". World Socialist Web Site. Check date values in: |date= (help)
  5. Sender, Henny (January 29, 2004). "Outside Audit: Parmalat's Brazilian Unit May Offer Accounting Clues". Wall Street Journal.
  6. "Parmalat: A Particularly Italian Scandal". Forbes. December 30, 2003. |first= missing |last= (help)
  7. "BRAZIL: Parmalat lays off workers due to weak sales". Just Food. March 17, 2004.
  8. 8.0 8.1 8.2 8.3 "Parmalat crisis deepens". Daily Reporter. n.d.
  9. "More revelations plunge Parmalat into deeper crisis". Daily Reporter. n.d.
  10. "More executives arrested in Parmalat scandal". CBC. January 1, 2004.
  11. Sylvers, Eric (October 8, 2004). "Parmalat sues Bank of America". The New York Times.
  12. Michaels, Adrian (January 12, 2007). "Deloitte to settle Parmalat lawsuit". Financial Times.
  13. "Deloitte Italy sues Parmalat". Accountancy Age. May 2, 2006.
  14. "Parmalat Lawsuit Blames Failure on Auditing Firms". The Washington Post. August 19, 2004.
  15. Warmoll, Chris (April 16, 2013). "Grant Thornton wins Parmalat audit legal spat".
  16. Kingsbury, Kevin (July 28, 2009). "Bank Of America Inks $100 Million Settlement With Parmalat". The Wall Street Journal.
  17. "JPMorgan to pay Parmalat 43 mln euros to settle dispute". Reuters. October 29, 2015.
  18. 18.0 18.1 Sylvers, Eric (March 27, 2019). "Parmalat vs. Citigroup: 15 Years After Italian Scandal, Court Fight Rages On". The Wall Street Journal.
  19. "Paul, Weiss Wins $1 Billion Judgment for Citi in Parmalat Litigation". Paul, Weiss. April 18, 2019.
  20. Jucca, Lisa; Stempel, Jonathan (January 21, 2007). "UPDATE 3-Deloitte to pay Parmalat $149 mln to settle suit".
  21. 21.0 21.1 Warmoll, Chris (April 16, 2013). "Grant Thornton wins Parmalat audit legal spat".
  22. Reuters Staff (July 8, 2011). "Lactalis secures 83 percent of Parmalat after buyout".
  23. Pullella, Philip (January 1, 2022). "Calisto Tanzi, Parmalat founder convicted over huge 2003 bankruptcy, dies at 83".
  24. 24.0 24.1 24.2 Ferreira-Marques, Clara; Parodi, Emilio (June 28, 2005). "ITALY: Italy judge sentences 11 to jail in Parmalat case".
  25. European Food Agency News (February 10, 2021). "Crac Parmalat, Tonna returns to prison".