How to Say "Enron" in Italian

Parmalat, one of the world’s biggest dairy companies and a key part of corporate Italy, shocked the country on Friday by admitting €3.95 billion ($4.89 billion) supposedly held by its Bonlat financing unit in the Cayman Islands did not exist.

With reports circulating on Monday that the actual sum missing could be much higher, the scandal will easily overtake the €1 billion bookkeeping shenanigans at Dutch retailer Ahold. That would add credence to analogies that Parmalat has become “Europe’s Enron,” a reference to the failed U.S. energy giant which has become the leading example of bad accounting par excellence.

Over the weekend, Italian Prime Minister Silvio Berlusconi called the events at Parmalat “almost incredible,” but said Rome would do what was necessary to save as many of the company’s 35,000 jobs as possible.

“The government will intervene in order to secure the operating part of the firm and protect its jobs,” Berlusconi said. As Italy's eighth-largest company, active in more than 30 countries around the world, the economic impact of a Parmalat collapse would be considerable.

Opaque structure

Long known for its opaque structure and penchant for complicated financing, the extent of Parmalat’s troubles started to emerge earlier this month after it failed to pay back a €150 million bond on time despite supposedly having €4.2 billion of liquidity on its balance sheet. That led to the firms founder and chairman Calisto Tanzi to surprisingly hand over control to Enrico Bondi, a man with a reputation for turning around troubled businesses.

Bondi is now likely to file for protection from creditors as he tries to get the company's books in order. According to the Reuters news agency, Bondi was to meet with Italian Industry Minister Antonio Marzano to discuss how to proceed.

Italian prosecutors are now also involved to determine the extent of criminal activity such as fraud. Along with the company’s auditors, Grant Thornton and Deloitte & Touche, ex-Finance Director Fausto Tonna will come in for considerable scrutiny.

Some Italian newspapers had reported that Tonna had fled to Venezuela, but Reuters spoke to him by telephone in Collecchio, near Parma. “I've not run off anywhere,” he said, adding He had not yet been contacted by justice officials. He declined to comment on the €4-billion hole in Parmalat's accounts.