Banks deny milking conspiracy

23 January 2008

Citigroup, Morgan Stanley, Deutsche Bank and UBS have denied being involved in a conspiracy involving the largest bankruptcy that Italy has ever seen.

Lawyers for the three banks denied that their clients had misled investors about the financial troubles of Parmalat, the dairy group, prior to its collapse in December 2003.

In a landmark case seeing the first instance of banks going to trial along with employees in a corporate bankruptcy case in Italy, prosecutors accuse the financial giants and nine of their executives of manipulating figures.

After Parmalat was made bankrupt, it revealed debts of over $20 billion, which is eight times the amount that managers had previously admitted to.

Indeed, despite reporting profits every year for over a decade, the dairy group had never earned anything after it had floated on the stock market in 1992.

The banks stand accused of helping the Parmalat hide its struggling finances, with each charge carrying a prison sentence of up to 12 years.

"Neither Citigroup nor its employees did anything wrong,'' Nerio Dioda, the bank's lawyer, told reporters outside the court in Milan. "Why would the bank have lent $500 million to Parmalat if it thought it was in trouble?''

More than 42,000 investors have filed civil claims in connection with the Parlamat case.

Bank of America and Parmalat founder Calisto Tanzi will also be tried separately.

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