Ex-Parmalat CEO To Stay In Prison

A judge ordered former Parmalat chief executive Calisto Tanzi on Tuesday to remain in prison amid accusations he contributed to the dairy company's bankruptcy and misappropriated millions of dollars from its balance sheet.

Judge Guido Salvini rejected the defense request that Tanzi be granted house arrest pending formal indictment for what the U.S. Securities and Exchange Commission called in a lawsuit against the company "one of the largest and most brazen corporate financial frauds in history."

Parmalat filed for bankruptcy protection after it was revealed that a Cayman Islands subsidiary, Bonlat, didn't have about $4.9 billion in a Bank of America account.

Another judge involved in the investigation was quoted in Italian newspapers as saying the company's total debts run as high as $12.5 billion to $16.2 billion, although Parmalat officials have said the figure is lower.

Several Italian dailies reported Tuesday that Tanzi had acknowledged during questioning Monday that $620 million had been diverted from the company over seven or eight years. But he insisted that any illicit acts had been carried by top financial managers on their own initiative.

The reports of his remarks could not immediately be confirmed. Prosecutors say as much as $1 billion may have been misappropriated.

When asked Tuesday about the reported admission of misappropriating $620 million, Tanzi's attorney, Michele Ributti, refused to confirm a figure, although he said it was "reasonable" to think that was correct.

"It's not certain. I won't talk about a figure, but it's reasonable to think it's that," he told reporters as he arrived at the prison for a new round of questioning Tuesday.

He said the money went to the Tanzi family's tourism businesses.

"The tourism sector was fed by financing coming from Parmalat. This was confirmed," he said. Tanzi family controls a loss-making unlisted travel company, Parmatour.

Milan prosecutors grilled Tanzi again Tuesday, and emerged after nine hours inside the San Vittore prison without commenting to waiting reporters.

Meanwhile, Stefano Tanzi, Calisto Tanzi's son and a former CEO of Parmalat, arrived Tuesday morning at the prosecutors' office in the company's home base of Parma. Officials there, who have also launched an inquiry into Parmalat's bankruptcy, declined to comment.

The Parmalat case, one of the biggest financial scandals to hit Europe, bears resemblance to the collapse of U.S. energy trading giant Enron, which also used a complex web of related companies to hide billions in losses. Parmalat had some 200 subsidiaries, including Bonlat.

U.S. securities regulators are suing Parmalat for "grossly overstating its assets" to U.S. investors, who hold some $1.5 billion in its bonds and notes. Regulators are seeking civil penalties, repayment of ill-gotten gains with interest and permanent injunctions against future fraud.

Calisto Tanzi, who was detained by police on Saturday, is among 20 officials under investigation in the case. Prosecutors have accused him of fraudulent bankruptcy, market rigging, making false statements and false accounting.

The company said in a statement Tuesday that it was "conducting normal business operations" under new head Enzo Bondi and was seeking to reassure its suppliers that they will get paid.

Parmalat, Italy's eighth-largest company, employs 36,000 people worldwide, 4,600 of them in the United States and Canada. Its Chicago bakery is the third-largest cookie producer in the United States.

By Tom Rachman