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Epic, Enron-Style Fraud Brought Calisto Tanzi, the Founder of International

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Epic, Enron-Style Fraud Brought Calisto Tanzi, the Founder of International alisto Tanzi had it all. His Italian his old friend, Parma’s Mayor Ubaldi, was soon food empire Parmalat had made calling him a Jekyll and Hyde. the former cheese and sausage Tanzi did sponsor the restoration of Parma’s shop owner immensely wealthy. 11th century basilica and gave $30,000 to Yet his image was that of a restore the church organ. Reportedly, he also rather pious family man. The Tanzis were financed programmes for AIDS patients, drug Cundoubtedly Parma’s uncrowned royal fam- addicts and the poor. Just how much his lar- ily, but they happily rejected the glitzier gesse really cost him isn’t clear. lives enjoyed by many of their peers. They The Parmalat scandal came at a time when didn’t share the social cachet of Italy’s more Italy’s billionaire media-mogul Prime Minister, glamorous clans like the Agnellis of Fiat Silvio Berlusconi changed legislation to reduce and the Barillas of Barilla pasta, never mind rather than increase the penalties for fake Donatella Versace. They were so understated accounting, only furthering the image of Italy as that they weren’t in the gossip columnists’ having a rigged economy. sights. Not until December 2003. Yet friends, colleagues and workers alike That’s when Calisto Tanzi was arrested, reeled when Tanzi was carted away in handcuffs. accused of siphoning perhaps billions of US During his brief stay behind bars, a lawyer called dollars from Parmalat to family-owned sub- him “a broken man” and he reportedly alter- sidiaries, causing shareholders to lose their nated between weeping and wailing over having savings, and jeopardizing around 36,000 jobs lost everything and getting down on his knees to worldwide. The alleged crimes included fake pray. Meanwhile, the arrests of family members accounting and share price manipulation. and company executives were piling up. As much as US$12 billion could be missing “I said, ‘Oh, this is really big trouble!’” Parmalat’s in “Enron a la Parmigiana.” And trading of export manager Angelo Peracchi recalls. “I was Parmalat stocks and bonds on the Milan stock shocked. I couldn’t imagine it. For food and market only resumed less than six months ago dairy products, Parmalat was number one in after a suspension of almost two years. Italy.” Unfortunately, Peracchi had just purchased “The Tanzis are not Versace-style people,” some Parmalat bonds. But his most pressing fear says Ettore Livini, a reporter for Italy’s La Repubblica newspaper. “They’re not one of the Italian dynasties who have worked in the industry for hun- dreds of years. Calisto Tanzi actually started from scratch. They did not go on holidays where Italy’s glamour people went. They were low-profile.” The dairy emperor had some toys – like two antique yachts, one a 100- foot schooner worth $10 million, and a $45 million corporate jet. He also had his famed “God’s Helicopter,” so nick- named because the devout Catholic often loaned it to high-level clergy. But Tanzi, now 68, drove a Lexus and had no chauffeur. The family villa was rather nondescript, tucked behind a clutch of citrus trees outside Parma, Guiseppe Verdi’s birthplace and the home of parma ham and parmesan cheese. There were no opulent villas Parma in Sardinia or St Moritz. Staying close to his humble roots, Tanzi’s social high point was hosting an annual Swordfish Luncheon at their villa. All this makes his fall from grace even Above: Up to US$12 billion is allegedly harder to comprehend. There are clues, though, missing in Enron a la Parmigiana to another, more complicated side. Where some Opposite page: When Calisto Tanzi held Epic, Enron-style fraud brought Calisto Tanzi, the founder of international dairy his son’s wedding reception at the Palladian- saw a kind, hardworking, generous fellow, oth- style Villa Bertozzi, near Collechchio, the owners foods giant Parmalat, to his knees in one of the biggest corporate scandals in European ers saw an aggressive risk-taker. Tanzi’s philan- asked to be paid up front. Apparently, they Scam had tired of getting paid late for the milk they history. Sue Russell asks what caused the souring of Italy’s global dairy empire thropic reputation was also questioned and even sold to Parmalat’s factory a kilometre away Companies can stand trial in Italy. Exactly how much responsibility do firms like Grant Thornton have? Accounting reviews are limited because of cost, notes Hank Boerner: “So there is a high degree of trust in the corpo- rate statements and the words of the CEO and others.” And layers of protection are missing. In the US, unlike Italy, accountants work strictly for a company’s shareholders. “They are, under law, the protectors of the truth in terms of the finan- cials of a company,” says Boerner. Calisto Tanzi’s arrest was just the beginning of his family’s ordeal. Wife Anita was also investigat- ed for allegedly transferring $850,000 between accounts. As the scandal broke, Fabio Belloni, one of Tanzi’s lawyers, confirmed to the New York Times that there were “very real and strong ten- sions within the family.” Supposedly, the patri- arch’s children didn’t visit him in jail and his son Stefano and brother Giovanni stopped speaking to him. Yet it’s not clear if the family rift was 250 offshoot companies. The sheer scope of executives also participated in the fla- US$12 billion could be missing in the fraud was breathtaking. grant cooking of books. Two execu- “Enron a la Parmigiana.” The sheer scope Investigators believe that Parmalat’s intri- tives were arrested. cate scams went undiscovered for more than Banks and auditing firms alike of the fraud was breathtaking a decade. As Hank Boerner, a New York issues are adamant that they were com- and crisis management consultant specialis- pletely duped by Parmalat’s scams. was losing his job of 19 years. “Everyone was the grocery store and the distributor to falsely shredded documents and smashed computers. ing in governance and accountability, explains: Interestingly, lawsuits are flying in shocked, it was incredible,” he says. inflate the accounts receivable figures. Tanzi and his brother Giovanni resigned and “Corporate fraud is not always easy to detect. both directions. Parmalat is being sued That reaction reverberated through Italy and A tangle of offshore companies with fake company stock plummeted to cents a share. What can hide the bad news (and fraud) is the by Bank of America, for instance, but the international business community. It began assets and phoney profits was set up to off- The government sent corporate bailout whizz constant expansion of a company – acquisi- Enrico Bondi (recently appointed to look as though an ignoble end to Calisto set Parmalat’s exploding debts. The company’s Enrico Bondi riding in on a white horse to sal- tions and mergers bring more money, more Parmalat’s new CEO) is also on the Tanzi’s success story was inevitable. Tanzi was apparent fiscal health was a complete façade. vage Parmalat. operations, more countries for operations, offensive, filing his own lawsuits. 22 when in 1961, he dumped college after One version of events is that Calisto Tanzi On December 29, 2003, the US Securities more profits (or the claims of profits), etc. That At the time of press, a March his father’s death to run the family’s sausage ordered former CFOs Fausto Tonna and and Exchange Commission sued the bankrupt helps paper over the bad spots.” court hearing was expected to and cheese shop. Making his mark by creating Luciana del Soldato to set up the shell compa- firm for fraud (US investors bought over $1.5 Soon, auditing firms Grant Thornton and determine whether four global Parmalat’s signature Long Life milk, he diversi- nies. Tanzi claims Fausto Tonna concocted the billion worth of bonds and securities.) Tanzi, DeLoitte and Touche were dragged into the banks – Citigroup, Morgan Stanley, fied, producing yoghurts, ice cream, pasta sauce scams. Either way, things spiralled out of con- who has admitted to siphoning $630 million mess. And various international banks which Deutsche Bank and Switzerland’s UBS and biscuits. Parmalat’s products now sell under trol. The fictitious assets of one offshore sub- from Parmalat to a family-owned subsidiary, funded Parmalat at different times stand accused – and 13 bank executives should stand numerous names worldwide. In the US, Black sidiary, Bonlat Financing, grew to $8 billion. wound up under house arrest. He’s blamed the of harming the company and its shareholders trial for helping Parmalat’s former Diamond cheese and Mother’s Cookies prevail. What tipped off authorities? Various threads company’s financial woes both on the collapse by ignoring obvious signs that Parmalat was management mislead their investors. Parmalat underwent an enormous growth unravelled simultaneously with one real whop- of Latin American economies and exchange overstretched. DeLoitte denies any wrong- spurt after going public in 1990 – the Tanzis per. When Parmalat needed $180 million to rates, and on the impending bankruptcy of doing, saying its executives’ concerns were kept 51 percent of the company. Investigators redeem a bonds issue, a Bank of America account Parmatour, the debt-ridden private tourism brushed aside by Parmalat executives. Opposite page: Calisto Tanzi (second right), and his lawyers, Filippo believe it was in dire financial straits by 1993. it had claimed held $4.9 billion turned out not company headed by his daughter Francesca. Grant Thornton seems to have got down in Sgubbi (left) and Fabio Belloni (second left) Yet each year, it hid its financial losses and to exist. Disgraced CFO Fausto Tonna has since More family firms dominate Italy than any the murk, however.
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