(ANSA) - Calisto Tanzi, the founder of Parmalat, went on trial on Wednesday almost two years after a multi-billion-euro fraud scandal at the Italian dairy group rocked the financial community.
Tanzi and 15 other defendants face a range of charges, including market rigging, false auditing, misleading investors and hindering the regulatory activities of bourse watchdog Consob. All deny wrongdoing. Most of the defendants, who include former Parmalat and Bank of America employees and two ex-Deloitte & Touche auditors, were not present in court.
Two auditing firms are also on trial: the Italian office of Deloitte & Touche and the former Italian unit of Grant Thornton which is now known as Italaudit.
Bank of America's Italian office is also on trial as a civil party.
Tanzi entered the packed courtroom via a side door an hour after the hearing opened. Accompanied by two of his lawyers, the 66-year-old former Parmalat chairman proceeded to shake hands with lawyers representing Consob and one of the judges.
Observers said Tanzi might have arrived late to avoid confronting a throng of angry investors gathered outside the court. Parmalat's 15-billion-euro meltdown - dubbed 'Europe's Enron' - left more than 150,000 investors with virtually worthless bonds. Many of them are hoping for compensation in the trial.
But the trial is not expected to be a swift affair. Indeed, some three hours after it opened, presiding judge Luisa Ponti adjourned proceedings until December 2. Ponti said the next hearing would be devoted to the civil parties in the case, including many of the ordinary Italians who lost their savings.
The trial could also be delayed by a possible decision to transfer proceedings to Parma, near the dairy group's base, where a wider investigation is still under way. While Tanzi refused to speak to reporters, his lawyer Gianpiero Biancolella said his client's presence was a "sign of respect for the court."
Another of Tanzi's lawyers said that "Tanzi won't be attacking anyone. He intends to take full responsibility and clarify the context in which the alleged crimes took place." Tanzi's lawyers are expected to argue that their client, who faces a maximum jail term of 10 years, had not known about or approved the sale of bonds to small investors.
Dozens of Italian and international banks are accused of selling Parmalat bonds to small investors even when they knew the company was failing. One of the few co-defendants to appear in court on
Wednesday was Giovanni Bonici, the former chairman of Parmalat Venezuela and former CEO of Bonlat, a Cayman Islands-based unit which triggered the bankruptcy scandal.
Bonici told reporters that "I'm as much a victim as the investors and I expect to be fully acquitted."
"I will explain that I had nothing to do with the charges... I took over Parmalat Venezuela in 2003 when it was in a disastrous condition and I turned it into one of the best Parmalat units in the world," he said.
When asked whether he had known Bonlat was an "empty shell", Bonici replied: "I didn't manage Bonlat directly because I was in Venezuela. It was managed from Milan."
HOW THE MELTDOWN BEGAN
The Italian dairy giant's financial implosion began in December 2003, when Bank of America declared that a document claiming Bonlat had almost four billion euros in an account with the bank was a forgery.
The case escalated, eventually leading to Parmalat's collapse into bankruptcy amid debts of 14.9 billion euros and a fraud scandal which rocked the Italian financial world. Tanzi founded Parmalat in 1961, building up his father's salami business into one of the world's top 25 dairy and food groups.
But he is accused of stealing at least 926 million euros from the company and building it up through fraudulent earnings reports.
From 1990 until 2002, Parmalat lost money every year except one but nonetheless reported uninterrupted profits and routinely forged documents in order to deceive banks and regulators.
The US Securities and Exchange Commission called the case "one of the largest and most brazen corporate financial frauds in history."
Tanzi stepped down as chairman and CEO just before the group's meltdown occurred.
He was jailed in December 2003 and then granted house arrest in April 2004. He was released from house arrest in September 2004.
OTHER HEARINGS AND PROBES
While the Milan trial will deal exclusively with charges involving the stock market, a trial focusing on more serious crimes such as fraudulent bankruptcy and accounting fraud will be held in Parma, where the company is registered.
Tanzi's lawyers are expected to request that the two trials be merged.
Meanwhile, last June, preliminary hearings in the Milan investigation led to the first convictions against 11 defendants who had plea-bargained. The sentences ranged from 10 months to two years and six months with all but two suspended.
Tanzi's son Stefano and brother Giovanni were sentenced, along with Parmalat's former chief financial officer Fausto Tonna, ex-legal advisor Giampaolo Zini, ex-chief financial officer Luciano Del Soldato, a former treasurer, two former company accountants and two ex-board members.
The judge rejected Calisto Tanzi's request to plea bargain.
Two other defendants in the Milan case, Lorenzo Penca and Maurizio Bianchi, have been granted fast-track trials. The two, both former top auditors at the Italian branch of Grant Thornton, have been on trial since January.
Their trial could now be merged with that of Tanzi and his 15 co-defendants.
Meanwhile, other probes are under way in Milan. In July, prosecutors asked that four major banks, Citigroup, Morgan Stanley, Deutsche Bank and UBS, be sent to trial.
The banks have denied wrongdoing.
THE AFTERMATH
Government-appointed Parmalat administrator Enrico Bondi has succeeded in setting the dairy group back on its feet.
The corporate turnaround expert has pruned away many of Parmalat's non-core activities and is soon planning to relist on the stock market. Bondi has also gone after the banks, accusing them of
colluding to hide Parmalat's crisis. He has filed three lawsuits in the United States against
the group's former auditors, Citigroup bank and Bank of America, and is also trying to sue US bank J.P. Morgan and Italy's Unicredito bank through the Italian courts.
But international critics say Italy must also move to restore credibility to its financial markets with radical reforms aimed at protecting investors, boosting the regulatory system and introducing greater transparency.
Parliament has dragged its heels on approval of a reform bill which would boost Consob and minority shareholders and reduce the powers of the Bank of Italy in supervising the Italian banking system.
Bank of Italy Governor Antonio Fazio was accused by critics of failing to regulate banks which continued to sell Parmalat bonds almost up until its collapse. In the meantime, the credibility of Italian financial markets has taken another bashing with serious allegations of bias levelled at Fazio.
Fazio is suspected of having favoured an Italian bank over a foreign one in a takeover battle for another Italian bank. The governor insists he has done nothing wrong and has refused to resign, despite mounting pressure to do so.
