Page last updated at 06:05 GMT, Thursday, 6 October 2005 07:05 UK

Q&A: Parmalat's collapse and recovery

Parmalat building
Parmalat's facade crumbled and the company came crashing down

Parmalat, the Italian dairy company whose collapse shook European financial markets two years ago, is back in the headlines.

The trial of founder Calisto Tanzi is under way in Milan, with prosecutors looking to apportion the blame for the firm's billion-euro bankruptcy.

BBC News looks at the case and the current state of the troubled dairy firm.

What is Mr Tanzi accused of?

Mr Tanzi, who built the firm up from a small, family-run delicatessen in Parma, is accused of market rigging, false auditing and misleading investors and stock market regulators.

He is standing trial alongside 15 other people, including former Bank of America and Parmalat employees, as well as auditors.

Parmalat collapsed with a 14bn-euro ($17bn; 9.5bn) hole in its accounts.

The accused are said to have helped construct a web of complex financial deals, bond sales, offshore accounts and false book-keeping that hid the true state of the company and duped investors into giving it more cash.

Mr Tanzi argues that he was too far up the management chain to know the daily dealings of this top executives, whom he blames for Parmalat's problems.

The defendants have all denied the charges.

Will it be a quick trial?

Unlikely, as Italy's judicial system is notoriously slow.

There also is a separate investigation going on in Parma and Mr Tanzi's lawyers are expected to argue that the two inquiries should be merged, further slowing down proceedings.

Have some people already faced charges?

In June, a Milan judge found 11 people guilty for their roles in the collapse of Parmalat, including former chief financial officer Fausto Tonna.

Among the other executives convicted were Tonna's replacements Alberto Ferraris and Luciano Del Soldato, Mr Tanzi's brother and son, and members of an internal audit team.

What state is Parmalat in today?

Much better.

Calisto Tanzi, Parmalat's founder
Mr Tanzi was seen as one of Italy's brightest and best businessmen

After Parmalat filed for bankruptcy, the administrators brought in Enrico Bondi, a turn-around specialist who is well-respected in Italy and abroad.

He immediately set about trying to pare down Parmalat, which had ballooned to include firms such as a travel agency, and concentrate on its core dairy business.

The company also has been looking at ways of restructuring and hiving off its massive Brazilian business and is in the process of winding up its dairy division in Ireland.

As a result, earnings have improved to such an extent that the company is relisting on the Italian stock market, swapping 12bn euros of debts for equity.

Mr Bondi has also decided to go after some of the world's biggest banks, alleging they colluded to hide Parmalat's problems and seeking billions of euros in damages.

Among the banks accused are US giants Citigroup and JP Morgan, Switzerland's UBS, Germany's Deutsche Bank and Italy's Unicredito.

All of the lenders have denied any wrongdoing.

What is the fallout from Parmalat?

Italy's reputation took a battering, with critics accusing the financial markets of being opaque and of functioning like an "old boys' club", where deals took place behind closed doors and problems were overlooked.

The government of Prime Minister Silvio Berlusconi promised reforms and an overhaul of the regulatory framework, to ensure that nothing like Parmalat would ever happen again.

Investor confidence is returning, but it has been repeatedly dented by an underperforming economy and the recent scandal involving Bank of Italy governor Antonio Fazio.

Analysts have warned that the collapse of Parmalat is likely to cast a shadow over Italy's financial markets for more time to come.

Parmalat's founder goes on trial
28 Sep 05 |  Business
Prosecutors pursue Parmalat banks
29 Jul 05 |  Business
Deloitte considers Parmalat deals
07 Jul 05 |  Business
Citigroup seeks Parmalat damages
18 Mar 05 |  Business
Parmalat to return to stockmarket
03 Mar 05 |  Business
Parmalat founder offers apology
16 Jan 05 |  Business

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