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To: maceng2 who wrote (508)	1/6/2004 10:09:46 AM
From: maceng2	Read Replies (2) \| Respond to of 1417

Parmalat Heat Turned Up, Citigroup Sued Tue January 6, 2004 09:03 AM ET reuters.com By Jacopo Barigazzi PARMA, Italy (Reuters) - Prosecutors piled pressure on Parmalat's former finance chief on Tuesday to reveal how billions of euros vanished from the food group, as U.S. banking giant Citigroup and accounting firms faced legal action in the widening scandal. After 11 hours of questioning on Monday, former Chief Financial Officer Fausto Tonna was again taken from prison to the prosecutors' office in the northern Italian city of Parma, close to the headquarters of the now insolvent multinational. Investigators have accused Tonna of helping devise a web of offshore companies to hold fake accounts and non-existent assets which for over a decade fooled investors and regulators. Tonna, who on Monday told prosecutors he had followed orders from Parmalat's founder Calisto Tanzi, broached the subject of the food group's banks during four hours of interrogation on Tuesday morning, said a judicial source, who did not elaborate. The 65-year-old Tanzi has admitted to diverting some 500 million euros from the listed company into family funds but has said he did not know how the misappropriation was carried out. The hole in Parmalat's accounts could exceed 10 billion euros ($12.72 billion), prosecutors say, making it one of the world's biggest corporate scandals and raising questions for Parmalat's auditors and some global financial industry heavyweights. A U.S. class action law firm on Monday named investment bank Citigroup Inc and auditing firms Deloitte & Touche Tohmatsu and Grant Thornton among defendants in a lawsuit brought against the food group, filed on behalf of a U.S. pension fund. The lawsuit was one of the first brought by U.S. investors in Parmalat securities and was believed to be the first publicly announced suit to name firms other than Parmalat. The group's bonds are trading at about 20 percent of face value and its nearly worthless stock is suspended indefinitely. Citigroup was not immediately available for comment. It was not clear why it was named in the U.S. suit. The bank's ties to Parmalat include its helping to create special purpose vehicle "Black Hole," or "Buconero" in Italian, used for loans between units in the Parmalat group. Prosecutors have said an inner circle of Parmalat executives used intra-group loans to extract cash from the group. The Italian affiliate of Deloitte audited Parmalat's group accounts while Grant Thornton's Italian affiliate certified the Cayman Islands unit at the center of the scandal. Deloitte has said its 2003 mid-year report drew attention to concerns at Parmalat and it was required to rely on Grant Thornton Spa for the offshore units. Prosecutors have accused the chairman and a partner of Grant Thornton Spa of helping to devise the fraud. The two auditors, who are among the eight people arrested so far in the case, have denied wrongdoing. No charges have been filed in the case. Nevertheless, Grant Thornton International's global name had been damaged by the scandal, Chief Executive David McDonnell was quoted as saying in the Financial Times on Tuesday. Major U.S. mortgage lender Countrywide Financial Corp. announced on Tuesday that it has appointed KPMG LLP to replace Grant Thornton as its auditor after some 30 years. But Countrywide emphasized that the change followed a comprehensive review of accounting firms which it began in mid-2003 and was not the result of any disagreement with Grant Thornton on any matter of accounting principles or practices. In Italy prosecutors also want to hear from some of Europe's biggest banks about their ties with Parmalat. A Deutsche Bank spokesman said officials from the German bank would meet the Italian prosecutors on Wednesday for "a voluntary meeting purely for information purposes." Media reports have said the investigators want details on a five percent stake in Parmalat held by Deutsche Bank until December 19, the day the group's crisis exploded with the revelation of a fake four-billion-euro bank account. Financial sources have said the stake was a short-term, trading position. In Spain a spokesman for bank Santander Central Hispano declined to comment on media reports that the investigators believed some of the money missing from Parmalat passed through an account of an SCH unit in the Cayman Islands. An Italian consumers group, Confconsumatori, said on Tuesday it was considering taking legal action on behalf of bondholders against Parmalat's banks and market regulator Consob, blamed by some critics for having failed to foresee the scandal. Economy Minister Guilio Tremonti has proposed a bill to strengthen Consob's supervisory powers over stocks and bonds, partly by shifting some powers from the Bank of Italy to Consob. European Affairs Minister Rocco Buttiglione told Reuters on Tuesday he expected the government to wait for parliament to finish investigations into Parmalat before taking up any bill. There had been speculation the cabinet could discuss Tremonti's bill, which has divided the majority, as early as Friday. The U.S. Securities and Exchange Commission is looking to see whether banks had been "negligent or reckless" by selling $1.5 billion of Parmalat bonds to U.S. investors, a senior SEC official was quoted as saying on Saturday. Previous