Parmalat : An Italian Based Company

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Introduction and Overview of the Corporation

Parmalat is an Italian-based company most well known for its production of various forms of dairy product, as well as pastries and fruit drinks. The company, started in 1961 by a 22 year old Calisto Tanzi, was initially a small family run business that sold primarily meat products. Parmalat became a success once it had developed the concept of a milk that could remain unspoiled in tetra-paks for extended periods of time. This milk was called UHT (Ultra-High Temperature milk) and quickly allowed the company to hit the stock market due to its success. Currently, Parmalat is functioning in 33 countries with more than 70 factories, and parents a variety of other dairy brands worldwide. Some of the
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External stakeholders became both puzzled and concerned by the company’s decision to default -- if they had nearly $5 billion* stashed away, why would they be unable to afford a payment only a fraction of that value? This is what triggered the initial investigation into Parmalat’s finances.

In 2003, the threads holding Parmalat’s fraud together quickly began to unravel. To back up the existence of the Cayman Islands account’s funds, Parmalat had been using a letter allegedly written to them from the Bank of America to confirm that a transfer of the funds had been made. However, after brief scrutiny it was revealed that the letter had been forged, and so the funds did not exist. As the scandal was put under further scrutiny, it was revealed that Parmalat had not only been lying about the money in the subsidiary, but about various other assets as well. The accountants working for Parmalat had essentially invented assets out of thin air to offset their expenses and liabilities, and were lying about revenues as well. After thorough investigation it was determined that Parmalat was $17.6 billion* in debt. Trade of their stocks was immediately suspended.
* in USD

Stakeholders

The Parmalat scandal affected not only the decision makers but also internal and external stakeholders. The internal stakeholders include roughly 36,000 employees whose salaries depend on the success of Parmalat and the brands it parents. The aforementioned brands

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