convincing that the Bank of America alone, in 1997, provided $1.7 billion through bonds and private placements for U.S. investors. It also received $30 million or more as payments and commissions[3].
One of the main events that lead up to the Parmalat accounting scandal exposure includes the company changing its external auditor. In accordance with Italian law, an external auditor can be changed once in 9 years. So, in 1999, Parmalat, in accordance with Italian law replaced Grant Thornton with DeLoitte and Touche.
Grant Thornton was keen to keep working with Parmalat, which was a high profile company, as it would be good for their reputation still being developed. Therefore, they recommended that Parmalat spin off its travel and other businesses, and permit these to be under them [Grant Thornton]. Such an arrangement would be convenient to both Parmalat itself and Grant Thornton. Through such an arrangement Parmalat could then satisfy its new external auditors [DeLoitte and Touche] with Grant Thornton making illicit payments to Parmalat. This was made possible through the executives at Parmalat creating debts, and Grant Thornton creating false accounts from which Parmalat could be paid. Grant Thornton would then produce these records to DeLoitte and Touche who saw little wrong with them.
Numerous reports reinforce that Grant Thornton was aware of the ‘shell games’ that Parmalat was playing. One example of these games includes case of “cooking the books,” that reports the Cayman Islands subsidiary Bonlat claiming to have sold a large quantity of powdered milk in a span of one year to Cuba. It claimed that this quantity was sufficient to produce 55 gallons of milk for every individual on that island.
Another interesting event that lead up to Parmalat’s exposure of the accounting scandal was that Grant Thornton and Deloitte & Touche signed off on its increasingly surreal accounts. In return, it is said that they booked millions of dollars (Parmalat Scandal Deepens…, 2006).
In Parmalat's final weeks, Deutsche Bank had taken on helping it work with Standard & Poor's, hardly ten days before the exposure. Around this time, analysts around the world kept encouraging investors to continue purchasing its stocks and bonds.
In 1999, finance director Alberto Ferraris laid out a financing scheme. He managed this through a Delaware company known as Buconero. This was the Italian for "black hole," that Citigroup established for Parmalat in 1999[4]. This company loaned out $137 million to a Swiss subsidiary of Parmalat. From here, the money was transferred to Parmalat companies. In return for Buconero’s service to Parmalat, it received a return of around 6%, in addition to $7 million in payments for Citigroup. Just like Parmalat made use of Buconero, it also used other offshore companies to dress up its debt till the time of its exposure[5].
Back in 1995, Parmalat also commenced concealing its debt through shell companies. It had been losing $300 million annually in Latin America, and decided to wipe this debt off the company's financial records. It managed to do so by using 3 shell companies situated in the Caribbean.
The huge debt patchwork through the 90s began to raise concern by the end of the decade. Esteban Pedro Villar, expressed concern and filed an "early warning report" (Gumbel, 2004). This was regarding Parmalat's Latin American set-ups. He had so many questions that his co
