Parmalat's creditors knew about the dairy multinational's true financial crisis well before its collapse at the end of 2003, Parmalat CEO Enrico
Bondi said on Tuesday.
Testifying at the Parmalat trial here, Bondi said that "without a doubt" banks knew that the group could not pay its bonds but continued to help to float them, often at higher than market rates.
The banks knew, he explained, "because all they had to do was compare the debt Parmalat declared in its balance sheet with the debt recorded at the (Bank of Italy's) office for risks and debts. There was a 700 million euro difference in 1997, which became a billion in 2002".
In his testimony, Bondi said that before his arrival Parmalat had been issuing bonds "with the sole purpose of keeping the group afloat. In fact, when it was no longer able to issue bonds the group collapsed".
"At no time was the group ever in a position to pay the bonds it was issuing because its debts were greater than its assets and its turnover was insufficient to cover costs," Bondi told the court.
At the time of its collapse, Parmalat had created an accounting hole of 14.5 billion euros, making it Europe's
biggest case of corporate fraud. Bondi, a respected turnaround expert, was called in by Parmalat's founder and ex-CEO Calisto Tanzi just days before the dairy group's financial meltdown.
He stayed on as the government's appointed administrator after the group was declared bankrupt and embarked on a major restructurization campaign. The plan involved selling off non-strategic activities
and this entailed slashing Parmalat's worldwide work force of 32,000 in half and cutting the number of its production plants from 132 to 77.
The success of the plan allowed Parmalat to return to the market last October and the following month Bondi was confirmed as the group's CEO by its new board of directors. Speaking on the sidelines of Tuesday's hearing, Bondi told the press that what he had found at Parmalat and what he had to do to save it was unlike anything he had ever dealt with in his long career.
The trial here in Milan deals with crimes involving the stock market, including market rigging, providing false accounts and misleading stock market regulators. Tanzi and 15 others are on trial including former
Parmalat executives, banks and accounting firms.
A separate trial will be staged in Parma, where the multinational has its headquarters, to deal with other
charges related to the group's collapse, including of fraudulent bankruptcy, false accounting and embezzlement.
