Parmalat banks instructed to reach settlement
billion accounting scandal have been ordered to discuss reaching a
Ongoing legal proceedings in New York have been adjourned and there is the possibility that the Italian dairy giant, which collapsed in disgrace when enormous accounting holes were found in December 2003, might receive compensation.
"Judge Kaplan of the Southern District of New York has adjourned until December 31, 2006 all discovery schedule in the Parmalat multidistrictlitigation currently pending in his court, and has directed the parties to explore settlement," said Parmalat in a statement.
Yesterday, the Times reported that Hermes, the UK fund manager suing several banks for their alleged roles in helping Parmalat to hide its debts, accepted $25 million each from Credit Suisse and Banca Nazionale del Lavoro to settle the case.
It is now possible that other financial institutions allegedly implicated in the scandal may reach some form of settlement.
Whatever the outcome, Parmalat has experienced a spectacular reversal of fortunes since December 2003. Under new chief executive Enrico Bondi, the company has followed a strategy to recoup the billions it lost in the financial scandal and two years of Italian government administration.
With Bondi at the helm, Parmalat has worked to stave off efforts by an Italian banking conglomerate to disintegrate the group, and has initiated various legal proceedings in Europe and the US against banks allegedly involved in the fraud.
Bondi's argument is that a number of financial institutions knew about the fraud and were partly responsible. However, the financial institutions involved in the 2003 affair have maintained that they were fooled by Parmalat's accounting chiefs.
Parmalat defaulted on more than €14 billion in debt at the end of 2003 after acknowledging it didn't have €3.95 billion it claimed was in a Bank of America account. But in May 2006, the Italian firm delivered an 18.4 per cent rise in core earnings to €73.2m in the quarter ending 31 March 2006, up from last year's €61.8m.
Revenue grew 9.8 per cent to €953.2m, from €868m in 2005's first quarter.
The firm attributed improved performance to increasing manufacturing and distribution efficiency, and a shift in its product mix to include more value-added items. An alleviation of debt repayments arising from 2003's accounting scandal also helped boost the figures, and the company's share capital increased by around €5.43m, due to the conversion into shares of 127,707 warrants.