Transatlantic similarities
The parallels with America's corporate scandals do not end with the fallibility of auditors. The lack of independence of non-executive directors on the board is another issue in common. Parmalat's was stuffed with family members and local cronies. Despite a 1999 reform that imposed independent directors on listed Italian companies, big ones such as Parmalat were allowed to opt out.
Moreover, Mr Tanzi was both chairman and chief executive of the group, now acknowledged in America and Britain as a potentially dangerous combination. There also seems to have been close complicity between him and the chief financial officer, with Mr Tanzi and Mr Tonna echoing the roles of Jeff Skilling and Andrew Fastow at Enron, of Bernie Ebbers and Scott Sullivan at WorldCom, and of Dennis Kozlowski and Mark Swartz at Tyco. And everywhere there were employees who either knew or suspected what was going on but who, for one reason or another, were dissuaded from blowing the whistle.
The Parmalat case may seem to differ in the simplicity of its fraud. The audited statements from Bonlat were used to show cash balances that were reported by the parent company as offsetting high levels of debt on its balance sheet. Each quarter a set of forged documents would show purported cash holdings at Bonlat that matched the head office's requirements. Deloitte seems to have accepted Grant Thornton's audits unquestioningly, while bankers and investors took the audited group figures as reassurance that, although complex, the group's finances were essentially sound. They failed to ask why a company with so much cash needed to borrow so much.
The deceit continued