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In Re: Parmalat Securities Litigation 04-CV-00030-Second Amended

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In Re: Parmalat Securities Litigation 04-CV-00030-Second Amended UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK In re PARMALAT SECURITIES LITIGATION : MASTER DOCKET : : 04 Civ. 0030 (LAK) ECF Case This document relates to: All Cases : : SECOND AMENDED CONSOLIDATED : CLASS ACTION COMPLAINT FOR : VIOLATION OF THE : FEDERAL SECURITIES LAWS : : ELECTRONICALLY FILED : : : DEMAND FOR JURY TRIAL : GRANT & EISENHOFER P.A. Stuart M. Grant (SG-8157) James Sabella (JS-5454) Diane Zilka (DZ-9452) 45 Rockefeller Center 15th Floor 630 Fifth Avenue New York, NY 10111 Tel: 212.755.6501 Fax: 212.755.6503 Of Counsel: COHEN MILSTEIN HAUSFELD & TOLL P.L.L.C. SPECTOR ROSEMAN & KODROFF, P.C. 1100 New York Avenue, N.W. Robert M. Roseman Suite 500 West Andrew D. Abramowitz Washington, D.C. 20005-3964 Rachel E. Kopp Steven J. Toll th 1818 Market Street, 25 Fllor Mark S. Willis Philadelphia, PA 19103 Catherine A. Torell (CT-0905) Tel: 215.496.0300 Julie Goldsmith Reiser Fax: 215.496.6611 Joshua S. Devore Co-Lead Counsel for Plaintiffs TABLE OF CONTENTS I. SOURCE OF THE ALLEGATIONS ................................................................................. 1 II. INTRODUCTION .............................................................................................................. 4 A. Overview of the Fraud ............................................................................................ 4 B. The Fraud in Action................................................................................................ 7 C. The “Professionals”.............................................................................................. 14 D. The Endgame ........................................................................................................ 21 III. JURISDICTION AND VENUE....................................................................................... 24 IV. THE PARTIES.................................................................................................................. 42 A. The Parmalat Group.............................................................................................. 42 B. Plaintiffs................................................................................................................ 44 C. Defendants ............................................................................................................ 46 V. DEFENDANTS’ FRAUDULENT SCHEME AND WRONGFUL COURSE OF CONDUCT ....................................................................................................................... 72 A. Use of Special Purpose Entities to Record Fictitious Sales – the Evolution of Bonlat.................................................................................................................... 74 B. Fictitious Sales of Powdered Milk to Cuba .......................................................... 86 C. Buconero – The Black Hole.................................................................................. 90 D. Parmalat’s and Citigroup’s Double Billing And Securitization Scheme.............. 95 E. Stale Invoices Used In Factoring Scheme With BNL .......................................... 99 F. Improper Reclassification of Debts as Inter-Company Debts Which Were Eliminated in the Consolidated Financial Statements ........................................ 104 G. Fictitious Bond Repurchases............................................................................... 108 H. Illegal Money Transfers to Tanzi Family Companies ........................................ 109 I. Epicurum............................................................................................................. 116 J. Fraudulent Classification of Debt as Equity ....................................................... 121 -i- K. Manipulation of Goodwill................................................................................... 124 L. Bank of America’s Scheme To Create And Implement Deceptive Transactions Involving Parmalat’s South America Operations, Including A Phony $300 Million “Outside” Investment In Parmalat’s Brazilian Operations ................... 126 M. CSFB’s Scheme for Parmalat to Issue Bonds Through its Brazilian Affiliate But Never Report That Debt on the Company’s Consolidated Financial Statements138 N. The Misrepresentations in the Sale of Bonds to Nextra ..................................... 141 O. Banca Intesa Committed Deceptive Practices By Providing Financing To Wishaw Backed By Product Sales The Bank Knew Were Fictitious............................... 144 P. Fictitious Sales of Trademarks and Other Intellectual Property......................... 147 VI. DEFENDANTS’ FALSE AND MISLEADING STATEMENTS DURING THE CLASS PERIOD .......................................................................................................................... 149 A. Overview............................................................................................................. 149 B. Parmalat’s Statements to the Press Regarding 1998 Results, the 1998 Annual Report and the March 1999 Notes Offering ....................................................... 151 C. First Quarter 1999 Results .................................................................................. 160 D. The June 1999 Notes Offering............................................................................ 160 E. The August 1999 Notes Offering........................................................................ 160 F. The 1999 Six Month Report ............................................................................... 161 G. The September 1999 Notes Offering .................................................................. 164 H. The November 1999 Notes Offering .................................................................. 164 I. The December 1999 Notes Offering................................................................... 164 J. The February 2000 Notes Offerings ................................................................... 165 K. The March 2000 Notes Offering......................................................................... 166 L. The 1999 Annual Report..................................................................................... 166 M. The 2000 First Quarter Report............................................................................ 175 N. The June 2000 Notes Offerings .......................................................................... 176 O. The September 2000 Offering ............................................................................ 177 -ii- P. The 2000 Six Month Report ............................................................................... 177 Q. 2000 Third Quarter Report.................................................................................. 179 R. The October 2000 Notes Offering ...................................................................... 180 S. The February 2001 Notes And Bond Offerings.................................................. 181 T. The 2000 Annual Report..................................................................................... 182 U. The 2001 First Quarter Report............................................................................ 189 V. The June 2001 Notes Offering............................................................................ 190 W. The July 2001 Notes Offerings........................................................................... 191 X. The August 2001 Offering.................................................................................. 191 Y. The 2001 First Half Report................................................................................. 191 Z. The September 2001 Notes Offering .................................................................. 194 AA. The 2001 Third Quarter Report .......................................................................... 194 BB. The December 2001 Notes Offering................................................................... 196 CC. The January 2002 Notes Offering....................................................................... 197 DD. The February 2002 Notes Offering..................................................................... 197 EE. The 2001 Annual Report..................................................................................... 198 FF. The 2002 First Quarter Report............................................................................ 203 GG. The May 2002 Debenture Offering..................................................................... 205 HH. The August 2002 Notes Offering........................................................................ 205 II. The 2002 Half-Year Report ................................................................................ 206 JJ. The 2002 Third Quarter Report .......................................................................... 209 KK. The December 2002 Notes and Bond Offerings................................................. 211 LL. The December 2002 Note Offering .................................................................... 212 MM. Parmalat’s Statements In February 2003 ............................................................ 212 NN. The 2002 Annual Report..................................................................................... 214 -iii- OO. The 2003 First Quarter Report............................................................................ 224 PP. The July 2003 Notes Offerings........................................................................... 228 QQ. The
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