Heavyweight Lawyers Going Toe-to-Toe in Parmalat Trial

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The blow-up of Parmalat Finanziaria, the Italian dairy company that collapsed in 2003 in an accounting scandal and billions in debt, came to pass several years before the Law Blog’s inception, and therefore the ensuing litigation — long in the making — has yet to make its LB debut. Let’s change that, shall we?

Yesterday, opening statements began in Parmalat’s — the new Parmalat’s — suit against its former bank, Citigroup. And thanks to our DJ Newswire colleague, Chad Bray, we’ve got up-to-the-minute coverage from Bergen County Superior Court in New Jersey.

Here’s what’s going on: Parmalat’s CEO, Dr. Enrico Bondi, who is suing on behalf of Parmalat, claims Citi bankers were complicit in the company’s meltdown by helping Parmalat insiders loot the company and conceal off-balance-sheet debt. Bondi’s lawyer, Kenneth Chiate of Quinn Emanuel in L.A., said in his opening that the bankers were driven by “greed” and wanted to make “higher bonuses and higher salaries through making loans to a company” — i.e. Parmalat — “that they shouldn’t have been making.” Bondi is suing Citi for $2.2 billion.

But Citi’s lawyer — Paul Weiss’s Ted Wells — said in his opening that the bank lost more money than any other creditor as a result of the fraud committed by the allegedly corrupt insiders at Parmalat. “Citigroup was the biggest victim,” Wells said. “We were the biggest dupe. We were the biggest sucker and it was embarrassing.” Citi is seeking $699 million in counterclaims in the New Jersey case, which, reports Bray, is expected to last up to three months. Wells said the bank made only about $131 million in fees in about nine years of working with Parmalat. The bank has since recovered about $330 million it lost due to the fraud, Wells said.

Wells said Parmalat’s former top executives - namely Parmalat founder and former CEO Calisto Tanzi, and its former CFO, Fausto Tonna, fooled “the entire financial community for years” by, among other things, claiming $9 billion in false transactions.

Today, reports Bray, Parmalat’s one-time accounting chief, Dr. Roberto Trovati, testified that the company only had 6.5 million euros when he joined in December 2003, six days after it filed for bankruptcy, but that it had claimed publicly to have nearly 4 billion euros in cash in the months before it collapsed under about $2 billion in debt.