Parmalat Fraud Analisis

In 1997, Parmalat jumped into the world financial markets in a big way, financing several international acquisitions, especially in the Western Hemisphere, with debt. But by 2001, many of the new divisions were producing losses, and the company financing shifted largely to the use of derivatives, apparently at least in part with the intention of hiding the extent of its losses and debt. InFebruary 2003, chief financial officer Fausto Tonna unexpectedly announced a new €500 million bond issue. This came as a surprise both to the markets and to the CEO,Calisto Tanzi. Tanzi forced Tonna to resign and replaced him with Alberto Ferraris. According to an interview he later gave Time magazine, Ferraris was surprised to discover that, though now CFO, he still did not have access to some of thecorporate books, which were being handled by chief accounting officer Luciano Del Soldato. He began making some inquiries and began to suspect that the company's total debt was more than double that on the balance sheet.
The plan for a €300M fundraising effort was dropped in September of 2003 and the company's shares depreciated significantly as a result of the publicised concerns raised overtransactions with mutual fund Epicurum, another Cayman-based company linked to Parmalat by November. Ferraris resigned less than a week after the public fall-out and was replaced by Del Soldato. Del Soldato resigned the next month, unable to get cash from Epicurum fund, needed to pay debts and make bond payments totalling at least €150M. Enrico Bondi was called in to help the company as it went intoadministration, while Tanzi himself resigned as chairman and CEO. Parmalat's bank, Bank of America, then released a document showing €3.95 billion in Bonlat's bank account as a forgery. Prime Minister Silvio Berlusconi initiated a fraud investigation and appointed Bondi to administer the company's rescue. Hundreds of thousands of investors lost their money and would never recover it. The companyofficially went bankrupt, though the Italian government used the legal mean "commissariamento" to save the trademark.
Calisto Tanzi, once a symbol of unlimited success, was detained hours after the firm was declared officially insolvent in late December and admitted that there was a hole of €8bn in Parmalat's accounts, but denied any cover-up. The arrest of five further executives of the companyfollowed. The auditors of the administration eventually determined that the debts amounted to €14.3bn, which was almost eight times the sum originally stated. Several of the company's subsidiaries subsequently went insolvent, including its Brazilian and American operations and its football club in Parma, before Parmalat sued several multi-national banks for huge sums of money.
Introduction
In thisfinal project I will analyze Parmalat’s fraud which is a real case of ethical fraud that relates to business, accounting, and financial matters. I will develop the case in to 5 steps: Identify the problem, Identify possible courses of action, identify any constraints relating to the decision, analyze the likely effects of the possible courses of action and Select the best course of action.
Toconclude, I would like to present you a brief introduction of the company.
Parmalat SpA is a multinational Italian dairy and food corporation. Having become the leading global company in the production of ultra high temperature (UHT) milk, the company collapsed in 2003 with a €14 billion ($20bn; £13bn) hole in its accounts in what remains Europe's biggest bankruptcy. Today, Parmalat is a companywith a global presence, having major operations in Europe, Latin America, North America, Australia, China and South Africa. Since 2011, it is a subsidiary of French group Lactalis.
1.- Identify the problem
In 2003 the Bank Of America accused Parmalat of fraud, becoming the Europe’s biggest bankruptcy the CEO of Parlamat was the one how gave the orders, the financier covered and falsified the...