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Last Updated: Wednesday, 31 December, 2003, 16:12 GMT
Police arrest Parmalat officials
Parmalat is one of Italy's best-known brands
Italian police have arrested five top Parmalat officials, as they widen their inquiries into the multi-billion euro fraud at the dairy giant.

Former Parmalat chief financial officers Fausto Tonna and Luciano Del Soldato are among those detained.

Two executives at the Italian branch of Grant Thornton, the company's auditors, have been arrested, and one of them, chairman Lorenzo Penca, has resigned.

Former Parmalat boss Calisto Tanzi is in custody, but has yet to be charged.

Offshore web

US market watchdog, the Securities and Exchange Commission (SEC), has described the Parmalat scandal as "one of the largest and most brazen corporate financial frauds in history".

The latest arrest warrants were issued by Parma prosecutors who suspect the businessmen of criminal association leading to fraudulent bankruptcy and false accounting.

Parmalat was declared insolvent over the weekend after a web of fictitious offshore funds and bank accounts were found to have hidden the massive losses.

Mr Tanzi has denied responsibility for covering up an 8bn euro (5.7bn; $10bn) hole in the company's accounts, saying it was hidden by top Parmalat managers of their own accord.

'Little treasures'

He had earlier admitted diverting 500m euros from Parmalat's funds to finance other parts of the business controlled by his family.

An Italian houehold name
The country's number one dairy goods brand
Employs 36,000 worldwide
Founded in 1961
Sales reached 7.6bn euros in 2002
Owns Parma football club

Grant Thornton has also denied any impropriety, continuing to insist that its staff acted correctly, and that they too have been victims of fraud.

"We carried out all the required controls, also with third parties," a company spokesman said.

Meanwhile Mr Tanzi's attorney Fabio Belloni has insisted that none of the missing money had been for his client's personal use.

He says it was diverted purely to keep the business afloat.

"It was an attempt to keep going forward, to close certain deals, and give the push to earn in a little way," Mr Belloni said.

"It wasn't that he put money in his pocket, the little treasures (or perks) were never there."

Recovery plan

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

Parmalat ex-boss Calisto Tanzi and the company logo
Calisto Tanzi is being detained in prison
Among them are Italian dairy farmers, to whom the firm owes some 120m euros.

Parmalat, which employs 36,000 people worldwide, will also now be able to put financial creditors on hold, while it draws up a recovery plan within six months.

Two teams of Italian investigators who are probing its books have now been joined by representatives from the SEC, who have arrived in Parma to carry out their own inquiries.

The SEC has laid a complaint before a court in New York accusing Parmalat of over-valuing assets and under-valuing debts in information to US investors.

The BBC's Sally Wilson
"There were eight more arrests today"

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