Parmalat Forged Accounts, Says Bank

Crucial documents in the financial scandal engulfing the Italian food group Parmalat have been forged, Bank of America said today.

As Parmalat prepared to seek bankruptcy protection, a lawyer representing the third biggest bank in the US said a statement had been presented to prosecutors in Milan giving details of the forgery.

The Parmalat scandal turned into a full-blown crisis last week, when Bank of America denied the authenticity of a document purporting to certify that €3.9bn of securities and cash were held in a Bank of America account in by Bonlat Financing Corporation, a Cayman Islands unit of Parmalat.

Prosecutors told Reuters that a scanning machine had been used to forge the Bank of America documents, which were then sent to auditors who certified Bonlat's accounts.

Bank of America last week told the Securities and Exchange Commission, the US financial watchdog, that genuine documents authenticating the €3.9bn account did not exist.

Bank of America, along with Citigroup and Merrill Lynch worked closely with Parmalat in setting up so-called special purpose vehicles designed to hold assets of Parmalat, a company with a labyrinthine financial structure weighed down with €6bn in debt. One US analyst went so far to describe the company's bonds as "junk bonds [high-risk, high-yield securities] in drag" as far back as two to three years ago.

Bank of America also put together a deal under which a group of investors acquired an 18% stake in a Brazilian unit of Parmalat. But that agreement unravelled last week as Parmalat's cash crisis prevented payment of $400m (£226m) to buy the investors out, after it ailed to bring the unit to the stock market.

The Parmalat saga has already led to changes to Italy's bankruptcy system. As prosecutors sought to get to the bottom of a scandal that has drawn parallels with the collapse of Enron, the US energy firm, the Italian cabinet rushed through a decree to help companies threatened with bankruptcy.

Under the new decree, a commissioner would be appointed to run crisis-hit companies, such as Parmalat, Antonio Marzano, the industry minister, said.

"The decree law provides for a completely new procedure," Mr Marzano said. "It sees the company asking [for a commissioner] and the ministry deciding. The minister would immediately approve extraordinary administration and nominate a commissioner."

Parmalat's board was expected to approve a request for protection from creditors later today. Parmalat, Italy's eighth-largest industrial group, earned €7.6bn in revenue last year from selling juice, milk and biscuits in 30 countries from Latin America to Asia.

The company, which employs 36,000 people, had a market value of €1.8bn before the crisis broke, but its shares are now almost worthless and its bonds are trading at barely 20% of face value. Shares in Parmalat were suspended from trade on today pending a statement from the company.

The group buys 8% of Italy's milk output, adding to pressure on the government to solve the crisis. Government representatives meeting milk producers, who have not been paid by Parmalat since August.

Parmalat's chairman and chief executive, who was brought in last week to lead the rescue attempt, met prosecutors in Parma, where he presented details of the situation he inherited to prosecutors.

Calisto Tanzi, Parmalat's founder, and three former finance directors of the company, are now under investigation. Mr Tanzi's brother and son, as well as former members of the company's board and outside auditors, are also being investigated.