Over four years after the meltdown of Italy's Parmalat SpA, the food company is set to begin presenting its case to a US jury accusing Citigroup Inc of playing a key role in its collapse.Citigroup is the first defendant to go to trial in the United States over accusations of helping conceal corrupt activity by former Parmalat insiders. Parmalat, which collapsed in December 2003 and emerged from bankruptcy in 2005, is seeking $2.2 billion in damages from the biggest US bank.
Citigroup is seeking $699 million of damages on its own claims, saying it was a victim of Parmalat's fraud.
Opening statements in the civil trial, being held in Bergen County Superior Court in Hackensack, New Jersey, about 15 miles from Manhattan, are scheduled for Thursday morning, according to a court official. A jury has already been selected.
The trial is expected to take at least two months and involve testimony by about 30 witnesses.
Parmalat is involved in dozens of legal cases in Italy and the United States. Its chief executive, turnaround specialist Enrico Bondi, has accused some 50 defendants of helping prior Parmalat management hide debt and inflate results.Parmalat originally sought $10 billion from Citigroup, contending the bank turned a blind eye to the activities of former company officials while it earned lucrative financial services fees. Last month, however, the judge overseeing the case narrowed the scope of Parmalat's claims.
In that ruling, Judge Jonathan Harris threw out claims accusing Citigroup of fraud, racketeering and unjust enrichment, as well as a claim for punitive damages. Parmalat was allowed to pursue a claim that Citigroup aided and abetted a breach of fiduciary duties by former Parmalat insiders.
Citigroup was allowed to press its own claims against Parmalat, including fraud and theft.
In a statement on Wednesday, Citigroup said it was “a victim of Parmalat's fraud and we are confident that the merits of our position will be demonstrated at trial.”
A lawyer for Parmalat declined to comment ahead of the trial.Parmalat, often dubbed “Europe's Enron,” collapsed under about €14 billion ($21.7 billion) of debt after uncovering a €4 billion ($6.2 billion) hole in its accounts. It has restructured and relisted its shares on the Milan stock exchange.
In March, 56 defendants went on trial in Parma, Italy, a case that could run for years. Parmalat founder Calisto Tanzi and former Chief Financial Officer Fausto Tonna are among those who face charges including criminal conspiracy. They have denied wrongdoing.
Parmalat also has sued Bank of America Corp and auditor Grant Thornton International in the United States. Those cases are expected to go to trial by early 2009.
Another former auditor, Deloitte Touche Tohmatsu settled in January 2007 for $149 million.
Much of the US litigation has taken place in US District Court in Manhattan, including an investor lawsuit against Parmalat that resulted in a €24 million ($37.3 million) settlement announced on May 2.
Citigroup tried unsuccessfully to move the New Jersey case to another court. Parmalat has sought to keep the case in the state, where its US operations had been based.
Parmalat is represented by law firm Quinn Emanuel in the case, while Citigroup is represented by the firm Paul Weiss. (Reuters)