No Crying Over Spilled Milk: Citi Triumphs Over Parmalat; Wells Wins

[WSJ Law Blog]

Wachovia may’ve slipped through Citi’s fingers, but after five long months of trial, the bank can take solace in big, fat jury verdict.



You’ll be forgiven, Law Blog readers, if you don’t remember the Parmalat-Citi trial, so here’s the backdrop:

Parmalat’s CEO, Dr. Enrico Bondi, sued on behalf of Parmalat, claiming that Citi bankers were complicit in the company’s meltdown by helping Parmalat insiders loot the company and conceal off-balance-sheet debt. In 2003, the Italian dairy company collapsed under the weight of an accounting scandal and billions in debt. Bondi’s lawyer, Kenneth Chiate of Quinn Emanuel in L.A., said in his opening statement 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 sued Citi for $2.2 billion. The case was heard in Bergen County Superior Court in New Jersey.

But Citi’s lawyer — Paul Weiss’s Ted Wells — argued that Citi lost more money than any other creditor as a result of the fraud. Wells said the bank made only about $131 million in fees in about nine years of working with Parmalat. The bank had recovered about $330 million it lost due to the fraud, Wells said in his opening. Citi sought $699 million in counterclaims.

Today, Citi recovered more than half what it requested — $364 million. The jury, reports the WSJ, rejected Bondi’s allegations that Citi aided and abetted a breach of fiduciary duty by corrupt Parmalat insiders.

Separately, Bondi is pursuing claims against Bank of America and Grant Thornton in U.S. District Court in Manhattan. The case is expected to go to trial sometime next year. The companies also have denied any wrongdoing.

“We have said from the beginning of this case that we have done nothing wrong,” a Citi spokeswoman said. “Citi was the largest victim of the Parmalat fraud and not part of it.”
Parmalat didn’t immediately have a comment.