Shares in Parmalat plummeted today (21 October) after the Italian dairy giant lost a lawsuit accusing Citigroup of playing a role in its 2003 financial collapse.
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Parmalat had accused Citigroup of aiding the doctoring of the company’s accounts by former directors and was seeking damages of up to $2.2bn.
Launching a counter suit, Citigroup argued that it had in fact been a victim of Parlmalat’s fraud.
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Yesterday, a New Jersey state court jury voted six to one in favour of the US bank and ordered Parmalat to pay civil damages of about US$364m.
The ruling comes as Enrico Bondi, Parmalat CEO, continues to pursue the banks and auditors he accuses of aiding Parmalat’s former management to defraud the company.
Parmalat went bankrupt under the weight of debts totalling EUR14bn (US$19bn). Europe’s biggest case of corporate fraud was revealed after a EUR4bn hole was discovered in Parmalat’s accounts.
In a statement issued yesterday, Citigroup said it was pleased with the verdict. “We have said from the beginning of this case that we have done nothing wrong. Citi was the largest victim of the Parmalat fraud and not part of it.”
Responding to the ruling, Parmalat said it would seek to have the verdict set aside. If this is denied, the company intends to appeal against the decision as well as an earlier court ruling narrowing the scope of Parmalat’s claims.
“Parmalat continues to believe that Citigroup played an important role in contributing to the financial collapse of the Parmalat Group in December 2003, and it will continue to pursue all legal remedies at its disposal to hold Citigroup accountable for its role, including through ongoing Italian criminal proceedings.”
Parmalat shares had fallen 15.39% at 12pm (BST) amid jitters over the implications this ruling could have for Parmalat’s outstanding legal action, dipping to EUR1.34.
