Parmalat founder given 18-year jail term over fraud

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."

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.

'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.

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.

BBC News 9 December 2010

Accountants seek to stay glamorous

The government will give the accountancy profession a generally clean bill of health today after a year-long investigation. It has concluded that the structure of Britain's auditing firms, the rules governing their conduct and the nature of their relationship with clients are sufficiently robust to eliminate any immediate risk of an Enron-style corporate collapse here.

However, Patricia Hewitt, the Trade and Industry Secretary, will impose some important changes as she unveils the findings of the investigation. She will make it clear that vigilance is critical to guard against lapses in professional standards, and will demand greater transparency from the big accounting firms. She will insist on clear procedures to ensure auditors do not develop cosy relationships with their clients, but the firms will not be forced to ditch lucrative non-audit work for clients − notably providing tax advice – unless conflicts of interest threatening the auditor's independence are identified.

Today's report is the third tranche of new rules to be introduced on both sides of the Atlantic − all aimed at improving corporate governance and strengthening auditor independence to ensure there are no more Enrons. First came the parallel reports from Derek Higgs and Sir Robert Smith in the UK; then the Securities and Exchange Commission's introduction of new regulations to implement more of the Sarbanes-Oxley legislation; and now the government has weighed in with the findings of its own inquiry. That the accountancy profession has emerged relatively unscathed from such a wide-ranging examination of its role and responsibility, conducted against a political backdrop of fear and retribution, is being attributed to the role played by Peter Wyman, the president of the Institute of Chartered Accountants in England and Wales.

For the past year, Mr Wyman has been engaged in shuttle diplomacy between London, Washington and Brussels. He has persuaded legislators, ministers and officials that the accountancy profession will not shirk its responsibilities to shareholders, and has argued eloquently that any changes to the structure of the profession must be designed to improve the quality of the audit and enhance the integrity of auditor independence.

The ICAEW has already introduced measures to guard against auditors becoming too cosy with clients. It has a five-year rotation of lead audit partners, and has established the concept of an independent review partner who can oversee the audit but who does not know the client. Even on the vexed question of no-audit services, the profession can report good progress towards ensuring that the lust for lucrative contracts does not affect the audit relationship with the client.