19-12-2003 21:18									#1
	Europe's Enron -- Parmalat and the Vanishing $5 Billion Support Apolyton buy from Amazon

Wow, and I thought Enron was bad. Enron was taken down by less of a discrepancy, IIRC. And Andersen was destroyed for much less.

quote: BoA says €4bn Parmalat account does not exist By Fred Kapner in Milan and Pedro Das Gupta in London Published: December 19 2003 8:54 | Last Updated: December 19 2003 12:04 Parmalat on Friday said Bank of America had rejected the validity of a document stating that Bonlat, the Italian dairy group's Cayman-based subsidiary, held €3.95bn ($4.89bn) in cash and securities in a BoA account. BoA told Grant Thornton, Bonlat's auditor, that a document dated March 6, 2003, claiming €3.95bn in cash and securities as of December 31, 2002, was not authentic, Parmalat said . Grant Thornton had used the document to certify Bonlat's 2002 balance sheet. Last week, Maurizio Bianchi, a Grant Thornton partner, said in an interview with Il Sole 24 Ore, an Italian financial newspaper, that the auditing firm had "received by letter confirmation of (the liquidity). And, naturally, of the existence of the securities in the portfolio of the company for which we are the auditors, including bonds emitted by Parmalat and bought back." Mr Bianchi was not available to comment on Friday on whether the letter of confirmation had been obtained from Parmalat or directly from BoA. Last week, Standard & Poor's said it appears to have been repeatedly misled by Parmalat. The rating agency slashed Parmalat's debt by 10 notches over 24 hours 10 days ago, from the lower limit of investment grade to one notch above default. Deloitte & Touche, an accounting firm, is the auditor for the consolidated accounts of Parmalat, which has more than 130 subsidiaries in more than 30 countries. In recent years, credit analysts have noted, Deloitte has reviewed an increasingly small proportion of Parmalat's stated consolidated assets. In Parmalat's annual report for 2002, Deloitte reviewed 51 per cent of consolidated assets, down from 78 per cent three years earlier. Grant Thornton, which had handled the consolidated accounts until 1998, audited most of the rest. Parmalat on Friday said Enrico Bondi, the new chief executive appointed on Monday, has called an extraordinary board meeting on Friday afternoon. The company said it would be initiating "the necessary urgent verifications" regarding the authenticity of the Bonlat document. Parmalat, which has about €6bn in debt, last week barely avoided default on a €150m bond. The company is in discussions to avoid default on $400m payment due to investors in its main holding company in Brazil. Parmalat has also been unable to track down the €4.2bn in cash and cash equivalents declared on its third-quarter balance sheet and supposedly available for the servicing of debt. Shares in Parmalat were suspended on the Milan bourse.

	19-12-2003 21:22									#2
	Increase the size of your Attachments

Burn them!

	19-12-2003 21:23									#3
	Got spare money?

Let's hope it will teach us Euros the evilness of the current corporate system, the same way Enron woke you Yanks up.

	19-12-2003 21:24									#4
	Suffering from ads?

yeah, it REALLY woke them up.

	19-12-2003 21:34									#5
	Support Apolyton, buy Civilization 2

quote: Let's hope it will teach us Euros the evilness of the current corporate system, the same way Enron woke you Yanks up.

This is just cleaning the stable floors. But man, that's a whole lot of dough to go missing. Makes the Turks look like amateurs.

	19-12-2003 21:37									#6
	Put an end to popups!

quote: Originally posted by DanS But man, that's a whole lot of dough to go missing.

I'm sure that, to some people, the dough isn't missing at all

	20-12-2003 00:18									#7
	Support Apolyton, buy Galactic Civilizations: Deluxe Edition

See the superiority of Europe?

	20-12-2003 00:44									#8
	Support Apolyton, buy GURPS/ Alpha Centauri

I'd bet that this happens all the time at Italy. What could you except from a country whose leader has contacts with Mafia.

	22-12-2003 11:55									#9
	Support Apolyton, buy Civilization 2

Jesus H... The discrepancy is probably about twice as much as the $5 billion originally thought.

http://news.ft.com/servlet/ContentS...p=1012571727088

quote: Parmalat black hole 'bigger than feared' By Fred Kapner in Milan Published: December 21 2003 19:58 | Last Updated: December 21 2003 19:58 The hole in Parmalat's accounts may be considerably bigger than the Italian dairy group revealed on Friday, people familiar with the situation said at the weekend. Parmalat last week said €3.95bn ($4.88bn) it once claimed to be in a Bank of America account had disappeared after the bank denied any record of the account. But people familiar with the group's affairs said the true figure could be more than €7bn. The Bank of America account was claimed to be held by Bonlat, a Cayman Islands-based subsidiary of Parmalat. Grant Thornton, Bonlat's auditor, said it had received documentation from BoA certifying the account's existence. Italian magistrates opened a criminal inquiry on Friday and spent most of Saturday gathering documents at Grant Thornton's office in Milan, the auditor for many of Parmalat's subsidia ries. Grant Thornton on Sunday said it had first signalled accounting discrepancies at Bonlat in June to Deloitte & Touche, the auditor of Parmalat's consolidated accounts. It also warned C onsob, the Italian stock market regulator. Grant Thornton previously said it received several documents from BoA regarding the €3.95bn account. BoA could not be reached for comment on Sunday. The bank last week said it filed affidavits with the US Securities and Exchange Commis sion, which Consob has asked for help. Fears that Parmalat could explode into one of Europe's worst corporate scandals ignited two weeks ago. The group, which claimed to have €4.2bn in liquidity, delayed reimbursement of a €150m bond that matured on December 8, and succeeded only with emergency help from banks and the government. The previous weekend, however, several banks were warned by Calisto Tanzi, the Parmalat chairman and chief executive who was ousted last Monday, that the company could not reimburse any of the €7bn in bonds and off-balance sheet debt the company claimed to have at the time. Many bankers and analysts fear the figure could be still higher. Corriere della Sera, Italy's leading newspaper, yesterday reported that Mr Tanzi on December 8 told executives from The Blackstone Group, the large private equity firm, that Parmalat had not retired €2.9bn in debt it had claimed to have done in its financial statements. A spokesman for Blackstone declined to comment. Parmalat's new management, installed one week ago, is expected to file for bankruptcy protection either today or tomorrow, a person close to the group said. Under Italian law, Parmal at can seek protection from creditors in two forms, but neither can protect it from action outside Italy. Silvio Berlusconi, Italy's prime minister, said the government would take measures to "above all save the industrial part of the company and jobs" and "separate finance from industry".

	22-12-2003 11:57									#10
	Remove this text

I wonder if this company's top execs are as close to Europe's leaders as the Enron guys are to Bushy.

Do they have a "good-old-boys" network in Europe?

	22-12-2003 12:29									#11
	Remove this text

quote: Originally posted by Sava I wonder if this company's top execs are as close to Europe's leaders as the Enron guys are to Bushy. Do they have a "good-old-boys" network in Europe?

we surely do...it depends on the country to what extent, however. Berlusconi is not what one would call a shining example for separation between buisness and state affairs

	22-12-2003 12:55									#12
	Support Apolyton, buy Civilization III: Complete

good lawd

it's one thing to cook the books

but to just MAKE STUFF UP!!!!???

	22-12-2003 20:27									#13
	Eurobashers should not gloat Put an end to popups!

The downgrading of Parmalat to junk status has hurt businesses all over the world. A number of insurers here in the US had holdings in Parmalat bonds. Bonds which they have been forced to dump at a loss as a result of the scandal and downgrading. At least two firms I know of are writing off bond losses that will result in a loss of between 45 and 50 cents per share in their earnings statements.

	22-12-2003 20:35									#14
	Support Apolyton, buy Civilization: The Boardgame

It seems to me that the poor Italians are innocent victims of a plot organized by America (Bank of) and Deloitte & Touche.

	22-12-2003 20:56									#15
	Full PM-box? Change here!

or it could be that parmalat really did just suck hard.

	22-12-2003 21:16									#16
	Support Apolyton, buy Civilization 2

I blame this all on America, and our imperialistic policies and domineering attitude. We invented crime, corruption and sin.

	23-12-2003 07:00									#17
	Got spare money?

Until auditors can be independent of the companies they are auditing you'll never get them pushing the companies for bona fide documents. They'll just feign ignorance and say they had no reason to doubt the validity of a document that claims to be genuine. Whilst their real concern is that they have to call the company they are working for liars, which will lose them the account and all that money from audit, accounts and other client services.

It doesn't help that auditors are generally not liable for failing to detect fraud or deliberate deception in accounts*. The concept of auditing is all a bit of a joke really, considering.

*In many instances even if they are aware of it they are not required to report it, unless it relates to soemthing like terrorism. They are simply advised to decline to sign off the audit report or accounts.

	23-12-2003 10:18									#18
	Support Apolyton or Terrorists Win

I drink Parmalat milk.

	24-12-2003 06:11									#19
	Grant Thornton Avatar Enlargement: We've got the solution

It appears to me that Grant Thornton are the main accountants who should be faulted in this case. D&T were not on the watch for Bonlat.

	24-12-2003 21:20									#20
	Browse Apolyton AD-FREE

Yeh, this isn't a gloat thread. It's just amazing to me that one forged document (if that is what happened) could be the basis of an auditor sign off for $5 billion in assets. Something might come out that they had inside help from Grant Thornton or Bank of America.

As to auditors, the Andersen debacle showed that a Big 5 acountancy firm could be brought down by something as simple as destroying potential evidence for one client. You would think that this example would strike righteous fear in the auditors, but maybe it doesn't (yet). Maybe another one has to fall. I don't know much about Grant Thornton, but would its dismantlement provide the sufficient level of terror?

	24-12-2003 21:45									#21
	Increase Your PM Length

The Financial Times is now talking like up to E10 billion ($12 billion) is missing. Wow.

	24-12-2003 21:55									#22
	Enter the AD-FREE zone

Don't look at me, I have less the $40,000,000.00 of it.

Last edited by Lefty Scaevola on 24-12-2003 at 22:10

	24-12-2003 22:27									#23
	Support Apolyton buy from Amazon

quote: Originally posted by DanS Yeh, this isn't a gloat thread. It's just amazing to me that one forged document (if that is what happened) could be the basis of an auditor sign off for $5 billion in assets. Something might come out that they had inside help from Grant Thornton or Bank of America. As to auditors, the Andersen debacle showed that a Big 5 acountancy firm could be brought down by something as simple as destroying potential evidence for one client. You would think that this example would strike righteous fear in the auditors, but maybe it doesn't (yet). Maybe another one has to fall. I don't know much about Grant Thornton, but would its dismantlement provide the sufficient level of terror?

You are right, this is not clear at all.
All assets recorded in third parties accounts (clients account or banks accounts) are subject to the confimation procedure by the auditors (direct inquiry from the auditor to the third party). The auditing firm of the subsidiary 1) should have obtained a written confirmation from Bank of America, and 2) should have been involved in the confirmation answer made by the subsidiary to Parmalat.
Blood is expected.

	24-12-2003 22:42									#24
	Put an end to popups!

quote: Originally posted by Big Crunch Until auditors can be independent of the companies they are auditing you'll never get them pushing the companies for bona fide documents. They'll just feign ignorance and say they had no reason to doubt the validity of a document that claims to be genuine. Whilst their real concern is that they have to call the company they are working for liars, which will lose them the account and all that money from audit, accounts and other client services. It doesn't help that auditors are generally not liable for failing to detect fraud or deliberate deception in accounts*. The concept of auditing is all a bit of a joke really, considering. *In many instances even if they are aware of it they are not required to report it, unless it relates to soemthing like terrorism. They are simply advised to decline to sign off the audit report or accounts.

the hope is that the auditors liabilities come from the investor side. if u show the financial world an audit by the same ppl who audited enron hopefully they will laff at u and look elsewhere.

thus the auditors need to maintain credibility to stay in business and the businesses need to hire credible auditors to get investors.

but yes it does seem opportunistically flawed.

	26-12-2003 09:56									#25
	Support Apolyton, buy Galactic Civilizations

Is Grant Thornton a Brit accountancy firm?

	26-12-2003 09:58									#26
	Get a bigger avatar today!

Yes: http://www.grant-thornton.co.uk/

	26-12-2003 10:00									#27
	Support Apolyton or Terrorists Win

Dan, in the "globalisation" thread, Ned linked to this NY Times article which is relevant to this one as well: http://www.nytimes.com/2003/12/25/b.../25euro.html?th

	26-12-2003 10:06									#28
	Increase Your PM Length

Of course, Grant Thornton is playing the "we wuz fooled" schtick in their press releases. The thing arguing against their complicity is that they were the ones to blow the whistle at this time.

	26-12-2003 10:10									#29
	Got spare money?

Yeah, I haven't seen such back-peddling since Wile E. Coyote ran over that cliff edge. Let's hope it does G-T more good than Mr. Coyote.

	26-12-2003 10:15									#30
	Get a bigger avatar today!

I have no knowledge of international finance, but shouldn't a third-party document (especially one "worth" $4 billion) presented by a primary party to another primary party require at least a phone call for verification purposes? "Hey, Parmalat sez they have a $4 billion account with you. Is that so?"

I once got a check from a person whose financial history resembled some of the finest products ever made by Goodyear and even I was smart enough to call his bank to ask if there were funds to cover. Maybe if this phone book thing doesn't work out I can go into high-level corporate finance.