Four of the world’s largest investment banks have been ordered to stand trial for stock market manipulation during the collapse of Parmalat, the Italian dairy group, in 2003.
A judge said Citigroup, Morgan Stanley, UBS and Deutsche Bank knew that Parmalat was bankrupt but continued to offer bond issues, rather than telling the market, in order to make fees from the dying company.
However, JP Morgan, Bank of America, Banco Santander and ABN Amro, who were also among the roster of banks providing financial services to Parmalat, were not charged.
Before its collapse, Parmalat was Italy’s largest food company, and the fourth largest in Europe. The scandal erupted when a ?14bn hole was found in the company accounts.
An investigation revealed that Parmalat had been on the brink of collapse for many years, but had muddled its books to stay afloat. Only one-eighth of the debt was accounted for. More than 135,000 creditors in Europe were left out-of-pocket by the bankruptcy.
The current head of Parmalat, Enrico Biondi, said the four banks knew of Parmalat’s problems, but continued to offer to raise more debt for the company.
The banks deny the charges. UBS said its conduct had been “proper”, Morgan Stanley said it would “vigorously contest” the charges, Citigroup said the trial would show it was a victim. Deutsche Bank has also denied any wrongdoing.
The trial will begin on January 22 in Milan.
