Parmalat: Us Banks Caught in Spotlight

Investigators into the collapse of the Italian dairy giant Parmalat are turning the spotlight on America's big investment banks.

Italian magistrates and officials from the powerful Securities and Exchange Commission are examining the role of lenders to Parmalat - which collapsed into administration last month following the disclosure of an €8 billion (£5.6bn) hole in its finances. These lenders include some of the US's largest financial institutions.

An SEC source said that while at this stage an investigation did not imply wrongdoing by the investment banks, it was focusing on placements of notes and bonds in the US. But he added: 'Of course, we are interested in what they knew, and if they did not know about the fraud, why did they not know about it?'

The SEC's inquiries are focusing on up to $1.5bn (£836m) of notes and bonds issued in private placements with US investors. Sources familiar with the situation indicate that banks, including Bank of America and Chase Manhattan (now JP Morgan Chase), led issues totalling more than $1bn.

SEC investigations may also extend to public bond issues if they were executed in the US. American banks involved in these - totalling $8.5bn in the past six years - include JP Morgan Chase, Merrill Lynch and Morgan Stanley.

It has also emerged that Barclays was party to a $500m public bond issue in 1998, making it the largest UK bank involved in Parmalat's financial expansion in the Nineties. A spokesman for Barclays confirmed its involvement, saying the bank's exposure was 'de minimis'.

Parmalat's administrator, Enrico Bondi, has instructed banking firm Lazard to draw up a database of all the financing transactions undertaken by Parmalat in the past 10 years. Company lawyers have made clear that the SEC and Italian magistrates are anxious to know about the involvement of US banks.

Meanwhile, it has emerged that Parmalat's auditor, Grant Thornton, does not have copies of crucial audit documents relating to the company's Cayman Islands subsidiary Bonlat, which is at the centre of the scandal.

The emergence of a €4bn hole at Bonlat triggered the Parmalat collapse. Last week, Grant Thornton, which was Parmalat's group auditor until 1999 but has continued to audit Bonlat and a number of other subsidiaries after that date, said it was launching an internal investigation into the scandal.

However, a spokeswoman admitted that it would be unable to investigate the Bonlat audit because it had handed its only copies of documents to Italian investigators, and that two of the key people involved - Lorenzo Penca, chairman of the Italian unit, and Maurizio Bianchi, lead partner on the Bonlat audit - were unavailable because they had been arrested.

'At the moment, we don't have copies or electronic versions of the papers that would be required if we were to look into the Bonlat audit,' she said.