WASHINGTON, Dec. 30 (UPI) -- Italian investigators launched a world wide search Tuesday for funds they believe Calisto Tanzi transferred from Parmalat, the financially ailing dairy giant which he headed, to secret overseas accounts. Well informed Italian sources said the search was currently focused on Ecuador, Tanzi's last stop on his last foreign trip before he was arrested in Milan Saturday.
Questioned by prosecutors, Tanzi "admitted to diverting funds" -- as his lawyer Fabio Belloni put it -- from the company's finances. Tanzi is reported to have said he siphoned off $600 million to rescue the company's travel subsidiary Parmatour. But in rejecting a request from Tanzi's lawyers to move him from jail to house arrest, the judge presiding over the investigation suggested that despite hours of questioning Tanzi has yet to bare the entire breast.
Judge Guido Salvini ruled that Tanzi must remain in jail because, he had "volunteered admissions that were sparse in certain respects, and not very convincing in others, and further explanations will certainly be necessary."
Observers said the $600 million was a drop in the bucket compared to the company's estimated losses of $10 billion by Tanzi's own admission. But what qualifies this as "one of the largest and most brazen corporate financial frauds in history," as the U.S. Securities and Exchange Commission described it Monday, is not financial mismanagement but the apparent web of deceit woven by Tanzi and others since at least 1995 to cover up Parmalat's increasingly disastrous financial position.
The U.S. market watchdog accused Parmalat of fraud and misleading investors. It said that when Parmalat offered $100 million in debt to U.S. bond investors earlier this year it misrepresented the state of the company's finances. The SEC also said Parmalat lied when it said it had used cash to buy back $3.6 billion of debt this year.
The company's auditors, the Italian branch of the international accounting firm Grant Thornton also insist that they were deceived by false information.
Parmalat, now in the hands of a rescue administrator appointed by the Rome government, has turned on its founder and owner and declared itself an injured party in any action against Tanzi.
The whistle was blown when Bank of America denied Tanzi's claim that a Parmalat subsidiary named Bonlat registered in the Cayman Islands had deposits worth $4.6 billion in the bank. Bank of America said it held no such account, and there was no money.
As eye-opening revelations tumble out daily in the Italian media, observers say Tanzi and so far nine of his associates face charges including market rigging, false auditing, and fraudulent bankruptcy.
The investigation is causing tremors in the north Italian town of Parma, home of Parma ham and Parmesan cheese, where Parmalat is a major employer. But the scandal has also captured the attention of the international business community, where Tanzi is largely seen as a throwback to the Italian entrepreneurs who built successful businesses in the boom years, often resorting to creative accounting to cope with Italy's complex bureaucracy.
But in today's interconnected global economy, the old Italian weakness for using mirrors soon comes home to roost.
