Parmalat founder held in Milan

Parmalat is a household name in Italy

Calisto Tanzi, the founder of troubled Italian firm Parmalat, is facing a day of questioning by Italian prosecutors.

He was taken into custody on Saturday night, hours after the dairy giant was declared officially insolvent by an Italian court.

Mr Tanzi is being questioned regarding alleged fraud and misappropriation of funds, after the firm admitted a multi-billion euro shortfall in its accounts.

The Parmalat boss is among 20 people facing possible criminal charges.

Rescue

Going into insolvency will enable Parmalat, which is now being run by an Italian government-appointed rescue administrator, to continue operations and pay its suppliers.

Most notably Italian diary farmers, to whom it owes some 120m euros ($149m; £84m).

The firm will also now be able to put financial creditors on hold, while it draws up a recovery plan within six months.

But the BBC's Jonathan Charles in Rome says the fate of the firm's 36,000 worldwide employees hangs in the balance.

Two teams of Italian investigators are now probing the firm's books, to see how it based its business on an allegedly fake financial statement.

Cayman Islands

The Parmalat affair has grown into one of Europe's biggest financial scandals since last week's discovery that papers detailing a 3.9bn euro ($4.8bn; £2.7bn) bank account on the Cayman Islands were false.

CALISTO TANZI Inherited Parmalat age 22 Chief executive for 40 years Handed control to son, Stefano, in 2001 Net worth estimated at $1.3bn Now under investigation Why Parmalat's muddy finances have worried the markets

This shortfall in the company's accounts could now rise as high as 12bn euro ($15bn; £8.4bn), according to the latest reports.

These also suggest that Fausto Tonna, Parmalat's former chief financial officer, has told Italian investigators that the fraud dates back until the late 1980s.

The scandal at Parmalat, now dubbed 'Europe's Enron' after the downed American energy giant, could also have grave implications for the company's auditors, the Italian branch of accountancy firm Grant Thornton.

According to the Sunday Times the international head of Grant Thornton has ordered an internal investigation into the affair.

'Victim'

The accountancy firm has been auditor to Parmalat, or some of its main subsidiaries since 1990.

Grant Thornton has so far publicly insisted that its staff have acted correctly, and that the fake document has made them a "victim" of fraud.

Questions have also been raised about how Italy's financial regulators could have missed the problems at Parmalat.

Italy has also been forced to call on the European Union to waive its rules on state aid to prevent Parmalat's woe from creating a wider dairy sector crisis.

The government is primarily concerned to minimise any wider fall-out from Parmalat, which plays a crucial role as Italy's biggest food company, purchasing 8% of the country's milk production.

Yoghurt

In the UK Parmalat employs 200 people at a dairy factory in the Lake District, north west England.

The facility in Kendal makes Loseley Yoghurt, which was acquired by Parmalat in 1996.

In total Parmalat has a 5% share of the UK yoghurt market, mainly through providing supermarket own-label products.