Synopsis

Calisto Tanzi revolutionized Italy’s dairy industry when he adopted ultra-high pasteurization, which allowed milk to remain fresh, without refrigeration, for more than six months. By 2003, Parmalat employed 36,000 people who produced milk, cream, butter, yogurt, fruit juices, and other processed foods in 31 countries on six continents. In December 2003, Parmalat deferred repayment of €150 million of bonds, saying it had “a bit of a liquidity problem.” Ten days later, Bank of America’s New York branch informed Parmalat’s auditors that a €3.95 billion account listed on the balance sheet of a Parmalat subsidiary did not exist. Italian prosecutors charged more than 20 people with participating in the Parmalat fraud.

Discussion Questions

1. What methods did Parmalat use to overstate its reported revenues?
2. According to the SEC, what methods did Parmalat use to understate its reported liabilities?
3. How did Parmalat executives conceal the company’s overstatement of cash from the auditors?
4. According to Stefania Chiaruttini, what errors did the Deloitte auditors make during their audits of Parmalat?

Additional Resources

SEC v. Parmalat Finanziaria SpA, First Amended Complaint. U.S. District Court for the Southern District of New York, Case No. 03 CV 10266 (PKC), 28 July 2004.

The Collapse of Italian Dairy Giant Parmalat. Journeyman Pictures explores the failure of one of Italy’s largest companies (11:06 minutes).