Originally created 01/15/04

Prosecutors question Parmalat founder's top finance officer

ROME -- Citigroup has told Italian prosecutors it might have been a victim of possible fraud in the Parmalat scandal as investigators continued to question a former finance executive on Tuesday to understand how the dairy conglomerate manipulated its books.

Italian news reports said Citigroup's concerns were over presumed irregularities with invoices involving milk concession holders.

Citigroup didn't comment on the details in the Italian reports.

Fausto Tonna, who was Parmalat's top financial officer, has reportedly talked with prosecutors about the relations Parmalat had with several international banks, including Citigroup. Last week, magistrates in Milan spoke to a Citigroup lawyer.

Earlier this month, a pension fund cited Citigroup in its investor suit against jailed Parmalat founder and former chairman Calisto Tanzi and Tonna. Citigroup is accused of having created a complex financial structure dubbed "Buconero," which means "black hole" in Italian. The structure was allegedly used by Parmalat executives to hide debt. Citigroup has said the suit has no merit.

Considered to be Tanzi's right-hand man, Tonna was jailed on Dec. 31 when police arrested several company officials and auditors.

The Italian news agency Apcom said Tuesday's questioning delved into whether tour companies owned by the Tanzis might have been used to try to deceive banks. Apcom said prosecutors are exploring the possibility that tourist resorts might have been purchased by Parmatour and then made to seen to have been bought at a much higher price to make them more attractive vehicles to win the bank's confidence.

Italian authorities haven't accused any banks of any wrongdoing in the case.

According to reports published this week, Tonna has revealed that Calisto Tanzi took millions of euros (dollars) in kickbacks over the years from a Swedish food packager in exchange for contracts.

The company, AB Tetra Pak, denied Tuesday that it made any illicit payments and said it would give Italian investigators documentation.

The company said it reviewed all of its discount payments to the company, its biggest customer, since 1995 and cannot identify any payments made either to the Tanzi family directly or indirectly, or to anyone else at Parmalat.

"On the contrary, the payments have always been made to the companies to which Parmalat has directed us," Tetra Pak said.

Apcom reported Tuesday that Tanzi, who has a history of heart problems, was transferred from his Milan prison cell to a prison medical ward so his health can be more closely monitored.

Parmalat, Italy's eighth-largest company, entered bankruptcy protection last month after the company acknowledged massive holes in its accounts. It employs 36,000 people and operates in 30 countries.

The scandal exploded last month when Parmalat revealed that Bank of America Corp. wasn't holding about 3.95 billion euros ($4.9 billion) of its funds, as the Italian company had reported in September.

A Brazilian company owed money by Parmalat has filed what is believed to be the first bankruptcy lawsuit against the Italian food and dairy giant in South America's largest country since Parmalat revealed the accounting scandal.

Orlandia SA is seeking payment for vegetable oil Parmalat's Brazilian division uses to make biscuits, Orlandia sales executive Flavio Alves said Tuesday. Orlandia is owed about $320,000 (900,000 reals), but some of the money is not due for payment until next month, he said.

Parmalat's Brazilian division declined comment on the lawsuit.


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