Parmalat SpA. Case 7/25/2006

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Company Name(s): 
Parmalat SpA.
Case Name: 
Parmalat SpA. Case 7/25/2006
Case Status: 
Lawsuit Filed
Case Status: 
Judgment Issued
Case Status: 
Settlement Proposed
Case Status: 
Settlement Approved
Affected Securities
BIT: PLT
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
07/26/2006
Class Period Begin: 
01/05/1999
Class Period End: 
12/18/2003
Court of Filing: 
United States District Court for the Southern District of New York
Date Settled: 
05/21/2008
Settlement Amount: 
$90,000,000
Deadline to Participate in Settlement: 
01/12/2009
Summary: 

11/14/2008 - Jury Awards Citigroup $364 Million in Parmalat Case
On October 20, 2008, a New Jersey jury found that Parmalat, an Italian food and diary company that had filed suit against Citigroup for $1.92 billion in damages, had defrauded Citigroup and awarded Citigroup its countersuit for $364.2 million in damages. The five month trial began with a claim by Parmalat that Citigroup had participated in the fraud that caused the company to go bankrupt in 2003 under $18.6 million in debt. Parmalat went bankrupt after revealing that a $3.95 billion account at Bank of America did not exist, and the documents used to certify the account were falsified. Many have called the scandal “Europe’s Enron”. Citigroup countersued, claiming that Parmalat had engaged in fraud and misrepresentation, and theft, which had made Citigroup a victim of Parmalat’s actions. The jury awarded Citigroup the highest amount they could grant for the damages, which was capped at $364.2 million. The verdict must be presented to the Bankruptcy Court in Parma, Italy for review and it is likely that any payment to Citigroup will be done through Parmalat stock. Parmalat stated that it will seek to have the verdict set aside and will appeal the decision. They are also pursuing remedies through an ongoing Italian criminal proceeding. Parmalat, which emerged from bankruptcy in 2005, has also filed suits against its bankers and auditors, and has so far recovered $2.66 billion.
8/25/2008 - A Federal Judge Has Narrowed The Class In The Shareholder Lawsuit Against Parmalat SpA And Dismissed Suits Against Bank Of America And Citigroup
Federal Judge Lewis Kaplan of the U.S. District Court for the Southern District of New York has certified a class of shareholders in the securities fraud action against Parmalat SpA and several of its accounting and financial advisers. Judge Kaplan ruled on August 20th, 2008, that the number of investors that will be included in a class-action lawsuit related to the 2003 bankruptcy of Italian dairy company Parmalat SpA will be narrowed. According to court documents Judge Lewis Kaplan ruled that only U.S. investors who bought shares in the company between Jan. 5, 1999 and Dec. 18, 2003 will be admitted in the class and Non-U.S. investors and bondholders will be excluded.
But according to Parmalat foreign investors could also present a new motion asking for the class to be expanded.
Previously Parmalat proposed a settlement for $40 Million in May (please see: Parmalat SpA Settles Shareholder Class Action for more than $ 36 million ) and offered as part of the settlement to pay 10.5 million new shares. The settlement is still pending and subject to court approval in September.
Last week Judge Lewis A. Kaplan dismissed the class action lawsuit against Bank of America Corp. and Citigroup Inc. Parmalat Finanziaria SpA filed bankruptcy under 14 billion euros of debt in December 2003. It is alleged that savings of thousands of small investors wiped out as a result of the collapse. The successor company shortened its name to Parmalat SpA. Investors sued Parmalat, its banks and auditors over the company’s bankruptcy .
Reportdely Deloitte & Touche Tohmatsu, Grant Thornton International, and Credit Suisse are among the remaining defendants in the class action lawsuit.
8/1/2008 - UniCredit SpA Settles A Lawsuit For Euro 271.7 Million Brought By Parmalat SpA Over The Dairy Giant’s Near Collapse in 2003
On Friday, August 1st, 2008, the Italian bank UniCredit SpA said it has agreed to pay Parmalat SpA and other companies in the group €271.7 (approximately $423) million to settle claims relating to the dairy giant’s near collapse in 2003 without admission of liability and only to avoid an expensive and drawn-out dispute. Parmalat SpA the dairy giant collapsed in 2003 under billions of euros in debt following an accounting scandal and ranked as one of Europe’s biggest financial scandals. Reportedly Europe’s fourth-largest bank Unicredit SpA denied any wrongdoing and said that “its behavior in the matter has always been correct and that, in particular, the group was never aware of the state of insolvency of Parmalat and the other companies in the Parmalat group.” According to the Settlement Milan-based lender UniCredit will pay the dairy company in exchange for withdrawing the company’s legal actions against the bank. The Euro 271.7 Million will reportedly be distributed as follows: € 229.7 million will be payed for current and potential re-vocatory actions and claims for compensations, € 37 million for tourism sector (Parmatour), € 4 million to soccer sector (Parma Calcio football club), and € 1 million - 42 companies in A.S. If the deal goes through, as expected, Parmalat will have received €1.84bn in legal settlements related to its bankruptcy.
7/2/2008 - A Judge Approved Class Period in Parmalat $ 40 Million Settlement
On June 2nd, 2008, Judge Lewis Kaplan of the the U.S. District Court for the Southern District of New York has clarified the terms of the $40 million settlement against Italian dairy giant Parmalat SpA, approved the class period for the composed of shareholders who purchased Parmalat stock, and scheduled a settlement hearing. The lawsuit alleged that Parmalat and numerous other defendants participated in a fraudulent financial scheme, resulting in the understatement of Parmalat’s debt by nearly $10 billion and the overstatement of its net assets by over $16 billion. In the meantime Citigroup Inc. will stand trial after all for its alleged role in the Europe’s largest bankruptcy of Parmalat SpA. Parmalat SpA was seeking originally more than $ 10 billion before Superior Court Judge Jonathan Harris threw out its allegations of fraud, racketeering and unjust enrichment, and a claim for punitive damages. Parmalat SpA is now still seeking more than $2 billion in damages from Citigroup Inc. in the New Jersey case alleging the banking giant contributed to its bankruptcy in 2003.
5/2/2008 - Parmalat SpA Settles Shareholder Class Action for more than $ 36 million
On Friday, May 2nd, the Italian dairy giant Parmalat SpA announced that it had reached a settlement with shareholder over a pending a class action filed n the U.S. District Court for the Southern District of New York in the wake of the accounting fraud that felled it. As part of the settlement with investors who filed the class action Parmalat SpA agreed to issue 10.5 million shares of stock, worth about $36 million. The settlement is subject to court approval.
7/25/2006 - Lawsuite Filed
According to a press release from a law firm a shareholder has filed a lawsuit for a class of investors who purchased Parmalat securities between January 5, 1999 and December 18, 2003. The class alleges that, for over a decade, corporate insiders, as well as outside accountants, banks and counsel, misled investors in one of the largest and most egregious corporate financial frauds ever. Following its sudden financial collapse, Parmalat announced that its audited financial statements had been understated by nearly $10 billion and that shareholder equity had been overstated by $16.4 billion.
The action is still proceeding more than four years after Parmalat shocked the investing world by announcing that a bank account of one of Parmalat’s subsidiaries at Bank of America that supposedly held $4.9 billion did not exist. The Defendants include entities related to the Deloitte and Grant Thornton accounting firms, Parmalat’s outside counsel, and the investment banks Citigroup and Bank of America.
To date, the parties have exchanged millions of pages of documents, and hundreds of hours of deposition testimony has been taken around the country and the world, including Europe, South America and the Middle East. Expert discovery is now proceeding.
The Lead Plaintiffs have reached a proposed agreement of settlement with Parmalat S.p.A., which if approved will provide 10,500,000 shares of stock in the Parmalat entity that emerged from reorganization proceedings in Italy.
The Court has previously approved a settlement with two defendants, Banca Nazionale del Lavoro (BNL) and several Credit Suisse entities, for payment of $50 million ($25 million paid by each).. The Court held a Hearing on July 19, 2007 on the proposed settlement, and on a request by a law firm and its co-counsel for reimbursement of certain of their expenses. The Court approved the settlement and the request for expenses with these two Orders.
The case is currently pending before Judge Kaplan in the Southern District of New York, and is proceeding against the remaining defendants.