parmalat
Background of the company
Parmalat Finanziaria SpA, an Italian food giant started out as a family business specializing in dairy products. It was founded in 1961 by 22 year old Calisto Tanzi, who discontinued his studies to expand his father's sausage and cheese shop. It began as a small pasteurization plant in Parma and further expanded into cheese, yoghurt, cookies, fruit juice and ready-made sauce production that are under different names in each country. They were the ones to produce the world's first shelf stable milk (tetra pack) which became an instant success.
This company, headquartered at Parma, Italy has expanded from 6 into 31 countries across six continents in 1990 and so was listed on Milan Stock Exchange. It was the eighth largest industrial group and contributed to 0.8% of the country's GDP. Around 36000 workers and 6000 dairy farms depended on Parmalat.
The company had to change its external auditor from Grant Thornton to DeLoitte and Touche in 1999 as Italian law states that changes in audit firms has to occur every nine years though the previous auditor can be consulted for concerns related to the firm. This was the main reason the scandal came to light.
In 2003, the firm tried to raise €300 Million in the form of bonds and was severely penalized. Hence it was under increased scrutiny of the investors as it was heavily indebted and capitalized. This was one of the very first indications of the crisis situation that was prevalent. Also doubts were raised by the Deloitte & Touche accountant regarding the €478 Million investment made in a Cayman Islands-based mutual fund, Epicurum (represented by a law firm, Zini & Associates).
The departure of two Chief Financial Officers in a span of six months and the increasing debt level created major concern amongst the investors and analysts. Analysts were puzzled that Parmalat was sinking in its core business inspite of having liquid assets of €4.2 billion.
Downfall of the company
On 14 December
Parmalat Finanziaria SpA, an Italian food giant started out as a family business specializing in dairy products. It was founded in 1961 by 22 year old Calisto Tanzi, who discontinued his studies to expand his father's sausage and cheese shop. It began as a small pasteurization plant in Parma and further expanded into cheese, yoghurt, cookies, fruit juice and ready-made sauce production that are under different names in each country. They were the ones to produce the world's first shelf stable milk (tetra pack) which became an instant success.
This company, headquartered at Parma, Italy has expanded from 6 into 31 countries across six continents in 1990 and so was listed on Milan Stock Exchange. It was the eighth largest industrial group and contributed to 0.8% of the country's GDP. Around 36000 workers and 6000 dairy farms depended on Parmalat.
The company had to change its external auditor from Grant Thornton to DeLoitte and Touche in 1999 as Italian law states that changes in audit firms has to occur every nine years though the previous auditor can be consulted for concerns related to the firm. This was the main reason the scandal came to light.
In 2003, the firm tried to raise €300 Million in the form of bonds and was severely penalized. Hence it was under increased scrutiny of the investors as it was heavily indebted and capitalized. This was one of the very first indications of the crisis situation that was prevalent. Also doubts were raised by the Deloitte & Touche accountant regarding the €478 Million investment made in a Cayman Islands-based mutual fund, Epicurum (represented by a law firm, Zini & Associates).
The departure of two Chief Financial Officers in a span of six months and the increasing debt level created major concern amongst the investors and analysts. Analysts were puzzled that Parmalat was sinking in its core business inspite of having liquid assets of €4.2 billion.
Downfall of the company
On 14 December