Bank of America denies prior knowledge of Parmalat's fake Cayman account

Friday, March 26, 2004

According to a Reuters report, Bank of America employees knew that Italian dairy foods group Parmalat had a $4.9 billion hole in its accounts a week before the news was made public, a judicial source said early this week. 

However, the bank later rejected as "grossly inaccurate and irresponsible" the reports that its employees withheld information about the account supposedly held by a Cayman Islands subsidiary of Parmalat, Bonlat Financing Corp. 

Bank of America's representative in Italy learned on December 12 from the US bank's New York office that the account, supposedly held by the Cayman Islands subsidiary and containing $4.9 billion, did not exist, said the Reuters source, who spoke on condition of anonymity. 

Parmalat stunned financial markets worldwide when it announced on 19 December that the account was non-existent, wiping out much of the remaining value in its shares and bonds. 

Days later, the multinational filed for bankruptcy protection. 

In its 19 December statement, Parmalat said Bank of America had alerted auditing firm Grant Thornton, which certified the accounts of the Cayman Islands subsidiary, Bonlat Financing Corp, about the missing money on 17 December. 

But Eros Francini, Bank of America's representative in Italy, asked an employee to call the bank's office in New York on 12 December to check up on the Bonlat account, and he was told that day the account did not exist, the source told Reuters. 

"We have seized e-mails and included them in the investigation and we have testimony from a member of staff, the person who was asked to make the check," the source said. 

A statement issued by Bank of America said, "No-one at Bank of America knew prior to 17 December of the non-existence of the Bonlat account at Bank of America. To the contrary, (Bank of America) had no information concerning the true financial condition of the Parmalat companies until 17 December, 2003." 

In other developments, an Italian judge on Wednesday ruled out a quick trial for 29 executives and three organisations charged with an array of financial crimes in the Parmalat scandal, legal sources said.

Milan judge Guido Piffer turned down the request for an accelerated process made by prosecutors last week.

A streamlined trial would have bypassed a process of preliminary hearings which in Italy's notoriously slow justice system could take years.
Prosecutors last week requested that 29 individuals, including Parmalat founder Calisto Tanzi, as well as auditors Grant Thornton, Deloitte and the Bank of America face an early trial in the $18.4 billion scandal.

Also on Wednesday, Switzerland said it had frozen more bank accounts in the investigation into suspected money laundering and multi-billion dollar fraud at Parmalat following a new request from Italian magistrates.
The accounts of the Italian group were held at banks in Switzerland's business capital, Zurich, and the southern city of Chur, a spokeswoman for the Swiss justice ministry, Sabine Zaugg, said.

"Our department ordered accounts to be frozen on 16 March following a supplementary request for assistance from judicial authorities in Milan," she told AFP.

Zaugg declined to give further details.

A regional bank in Chur, the Cantonal Bank of Graubunden, revealed last month that it had alerted authorities to a suspicious $3.75 million transaction there.

The Swiss Federal Prosecutor's office first froze several deposits in January when it launched an investigation into former Parmalat executives' business in southern Switzerland, where the group has two subsidiaries.

That was followed by further requests from Italy, amid close co-operation between magistrates and police on both sides of the border in the accelerating investigation into the group's hidden financial affairs abroad.

Switzerland's banking regulator is also carrying out a probe into Credito Privato Commerciale (CPC), a Swiss-based financial services firm linked to Parmalat.

Switzerland is widely regarded as an attractive financial haven because of its strict banking secrecy laws. However, secrecy provisions are lifted in criminal probes, including suspected money laundering or fraud.

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