Chapter 4 Mini Case

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1) They were able to hide it for so long because Parmalat managers simply found a way to hide it by “invented assets” that would cover the company’s debts as well as falsifying accounts over a 15 year long period. I think that no one thought to check the paper work or to investigate what the company was doing. No one was doing their job so it resulted in many law suits by the new CEO because he was disgusted that they overlooked and even helped Parmalat to conduct fraud.

2) The role of the international banks and auditors when it comes to Parmalat’s collapse is half as much their fault as it is the original company’s fault. For example the new CEO Enrico Bondi was convinced that the international banks and auditors were in fact complicit of their fraudulent actions. They actually helped the company disguise the fraud finances in exchange for fat fees.

3) Parmalat was a dairy company which was founded in 1951 in the 1980’s the government decided to privatize their municipal dairies. In the 1990’s they wanted to expand to international markets where they decided to borrow heavily from international banks and investors. In order to understand the question it is necessary to understand what corporate governance is. It is defined as the economic, legal and institutional framework in which corporate control and cash flow rights are distributed among shareholders, managers as well as other stakeholders according to the book. With this definition it is meant that Italy’s government gave up the right legally to intervene in what Parmalat did, so it is easily said that Parmalat failed themselves through their own fraudulent activities.
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