Parmalat sued its former auditors, Deloitte & Touche and Grant Thornton, on Wednesday, claiming damages of at least $10 billion (R65 billion) and broadening a legal battle to claw back funds from financial partners it says helped drive it into insolvency.
Parmalat said it was seeking damages from Deloitte Touche Tohmatsu and Grant Thornton International, as well as their Italian and US affiliates.
The company said in its lawsuit, which was filed in the US:
“Because the defendants failed to properly audit Parmalat, and in many cases with defendants' active participation, something in the order of $10 billion has gone out the door and been stolen, squandered or wasted by Parmalat insiders.”
The new administrators of the Italian dairy and food group want to recover funds from former partners they say either tolerated or promoted schemes that helped bring down the global group last December.
Parmalat is looking for compensation on 12 counts, ranging from theft to professional malpractice. It said the audit firms “each intentionally or with gross recklessness disregarded [their] known duty to Parmalat”. It said auditors from Grant Thornton were “active conspirators” with Parmalat's former management, while group auditors Deloitte failed to spot “red flag after red flag”.
The lawsuit claimed: “Deloitte did not just miss a few issues here and there. It failed time and time again to report on the frauds that were lying not merely just below the surface, but right in front of its eyes.”
Deloitte said the suit was unjustified and vowed to vigorously defend itself.
“It was the actions of Deloitte Italy that led to the fraud being uncovered,” Deloitte said.
Grant Thornton International called the suit illegitimate. It said neither its umbrella organisation nor its US affiliate could be held responsible for the actions of its former Italian unit.
Until January, Grant Thornton's Italian unit audited some of Parmalat's offshore units, including the Cayman Islands unit at the heart of the scandal.
Deloitte & Touche was responsible for group accounts.
The lawsuit listed three claims each for $10 billion in damages for the company, its bondholders, noteholders, other lenders and shareholders.
But Parmalat's lead attorney said the total amount sought in damages should be read as “at least” $10 billion.
“It is not possible to recover the same damages twice,” said John Quinn of Quinn Emanuel Urquhart Oliver & Hedges.
The company has already taken several of its former bankers to court, both in Italy and the US.
Parmalat sued Citigroup for up to $10 billion last month, accusing the world's biggest financial group and some of its units of playing crucial roles in its plunge into insolvency.
Smaller suits followed this month against UBS and Deutsche Bank.
The banks have denied any wrongdoing. Citigroup said the suit was “a tactical manoeuvre to pressure a deep pocket”. But Parmalat has said it would press ahead with its efforts to recover funds.
Ceki Medina, an analyst at DebtTraders, a broker in distressed securities, said the market valued Parmalat's potential windfall from its claims at around e375 million (R3 billion). Parmalat Finance benchmark bonds were trading at 17 percent of face value on Wednesday, compared with 13 percent at the end of July.
“I think this is a relatively conservative assumption. If banks start paying out money, the bonds will go up,” Medina said.
Grant Thornton's former Italian office and Deloitte are being investigated by Italian authorities in connection with the Parmalat case.
The former chairman and a partner of Grant Thornton are also under investigation, along with two Deloitte partners. Prosecutors in Milan have recommended that the men and the two organisations stand trial.