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Last Updated: Sunday, 28 December, 2003, 17:49 GMT
More questions for Parmalat boss
A bottle of Parmalat milk
Parmalat is a household name in Italy
Italian police have been granted extra time to question Calisto Tanzi, the founder of scandal-hit Parmalat.

Mr Tanzi was taken into custody on Saturday night, hours after the firm was declared officially insolvent.

He has yet to be charged in connection with the company's fictitious 3.9bn euro bank account, but a Milan judge has granted more time for questioning.

Tanzi's lawyer has meanwhile insisted that while there were non-existent assets, no money had been stolen.

Criminal charges

Michele Ributti said: "No money disappeared, (there were) just non-existent assets."

Italian police can now continue to keep Tanzi in custody beyond the 48 hours allowed under their original detention order, following the judge's formal issuing of an arrest warrant.

The former Parmalat boss is among 20 people facing possible criminal charges over alleged fraud and misappropriation of funds, following the company's admission that a 3.9bn ($4.8bn; 2.7bn) Cayman Islands bank account did not in fact exist.

Parmalat itself is now being run by an Italian government-appointed rescue administrator, so it can continue operations and pay its suppliers.

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

Creditors

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.

The Parmalat affair has grown into one of Europe's biggest financial scandals since last week's discovery that the bank account on the Cayman Islands did not exist.

CALISTO TANZI
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

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

'Europe's Enron'

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.

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

'Victim'

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

Italy's treasury has also proposed creating a powerful regulator able to prevent any future repeat of the Parmalat scandal.

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.




WATCH AND LISTEN
The BBC's Richard Forrest
"As much as $12bn could be missing"



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