Page last updated at 10:04 GMT, Tuesday, 21 October 2008 11:04 UK

Parmalat shares hit by US ruling

Parmalat shares were suspended briefly after the court's verdict

Shares in Italian dairy group Parmalat have dived after the firm was ordered to pay Citigroup $364m in damages.

Parmalat had accused Citigroup of actions that contributed to its collapse in 2003, but a New Jersey court found in favour of Citigroup.

Parmalat had been seeking about $2bn in damages from Citigroup, but the US bank had countersued.

Parmalat's shares were suspended early on Tuesday morning, and when trading resumed they fell almost 19%.

Hiding losses

Parmalat collapsed in December 2003 after uncovering a 4bn-euro hole in its accounts. It sued Citigroup, accusing the bank of helping to cover up the corrupt activities of Parmalat officials.

Specifically, it accused the US bank of ignoring warning signs at the Italian company in order to secure high advisory fees and bonuses for its bankers, and of helping the company to hide its losses by providing loans that did not appear as debt on Parmalat's balance sheet.

Citigroup argued that it believed Parmalat was financially healthy and that it was deceived by the diary giant.

It claimed to have lost $699m at the time of Parmalat's bankruptcy filing.

Legal battle

Following the ruling by the New Jersey court, Parmalat said it planned to "continue to pursue all legal remedies at its disposal to hold Citigroup accountable for its role".

Parmalat also said the damages award was subject to review by a bankruptcy court in Parma, Italy.

Andrea Hurst, spokeswoman for Citigroup, said: "Citi is pleased with the verdict. We have said from the beginning that we have done nothing wrong."

Parmalat emerged from bankruptcy in 2005. Chief executive Enrico Bondi has filed many lawsuits against former Parmalat bankers and auditors, including Bank of America and auditor Grant Thornton International.

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