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Parmalat founder given 18-year jail term over fraud

2010-12-10 13:10:39

Calisto Tanzi (taken in 2006) Parmalat founder Calisto Tanzi had already been sentenced for separate offences

The founder and former chief executive of Italian food conglomerate Parmalat has been sentenced to 18 years in jail for his role in a fraud at the firm.

Calisto Tanzi was convicted of criminal association and fraudulent bankruptcy.

A court also ordered former Parmalat executives to pay the firm 2bn euros ( 2.7bn; 1.7bn) and reimburse thousands of defrauded investors.

Parmalat collapsed in 2003 with a 14bn-euro hole in its accounts in what was Europe's biggest bankruptcy.

Some 135,000 investors lost the money they had invested in Parmalat's corporate bonds, and about 30,000 of them were listed as complainants in the case.

They are expected to share compensation worth an estimated 30m euros, as ordered by the court.

A representative of the investors told Italian television: "I believe [this sentence] is right, since these people have caused much pain and despair to many people. And it's right for them to pay for it."

Parmalat history

The dairy company was formed in 1961 by 22-year-old Calisto Tanzi
It grew into a powerful multi-national, financing acquisitions by taking on huge debts
In 2003, it was revealed that a bank account in the Cayman Islands said to contain 4bn euros of company cash was fictitious
Firm collapsed shortly afterwards owing a sum later discovered to be 14bn euros
Tanzi arrested in December 2003

The judge in the city of Parma, from where the company gets its name, also sentenced the company's former financial director Fausto Tonna to 14 years in prison.

Tanzi's brother Giovanni was sentenced to 10 years, seven months.

'Debt factory'

At the time of its collapse, Parmalat was employing about 36,000 people in 30 countries.

And although the scandal only emerged in December 2003, the trial prosecutors said the group had been struggling for many years, surviving in part because of fraud on its balance sheets.

"Parmalat was the symbol of a sick system and the biggest debt factory of European capitalism," investigator Lucia Russo said during the hearing.

Tanzi, 71, had already been given a 10-year sentence for stock market manipulation, following an earlier trial in Milan, but had appealed.

His lawyer, Giampiero Biancolella, said that his client maintained his innocence and would also appeal against the latest conviction.

This appeal means that he will not be imprisoned pending a final ruling by Italy's Supreme Court, BBC Rome correspondent David Willey says.

Parmalat was relisted on the Milan stock exchange in 2005 - without its loss-making foreign divisions.

Current Parmalat management and investors took legal action against several banks, including Bank of America and Citigroup, for their role in its collapse. Parmalat has recouped more than 2bn euros in settlements.