The complaint charges certain of Parmalat's senior insiders and its legal, accounting and financial advisors with violations of the Securities Exchange Act of 1934. The complaint alleges that Parmalat's senior insiders, together with Parmalat's legal, accounting and financial advisors, concocted a massive scheme whereby they overstated Parmalat's reported profits and assets for more than a decade. The alleged scheme involved the creation of bogus bank accounts, the use of forged financial records and the manipulation of Parmalat's balance sheet and income statement via fictitious investment assets and sham transactions, and was designed to and did allow defendants to divert approximately $1 billion to themselves and/or to companies controlled by them via professional fees and clandestine asset transfers and enabled Parmalat to raise more than $5 billion from unsuspecting investors from the sale of newly issued securities.
According to the complaint, the fraudulent scheme began to unravel in the fourth quarter of 2003, when, contrary to defendants' Class Period representations that Parmalat was experiencing strong growth in net operating profit and had a healthy balance sheet, it was disclosed that: (i) almost 40% of Parmalat's entire asset base, purportedly held in a bank account at Bank of America, did not exist; (ii) Parmalat had been declared insolvent; (iii) the $625 million of Parmalat's cash purportedly invested in a liquid investment fund in the Cayman Islands could not be retrieved; (iv) defendants had manipulated the Company's income statements and balance sheet for more than a decade by using off-shore shell companies, special purpose entities, forged documents and sham transactions; and (v) at least eight Parmalat senior insiders, auditors and lawyers, including certain of the defendants, had been taken into custody for the perpetration of this multi-billion dollar fraud.
The complaint further alleges that as the magnitude of the fraud began to reach the market, defendants attempted to destroy evidence and/or ordered their subordinates to destroy evidence of the fraudulent scheme in an effort to evade liability for their participation in one of the most shocking corporate scandals ever to afflict the public financial markets. The revelations of defendants' misconduct caused the price of Parmalat stock to plunge 95% before trading was suspended on December 29, 2003.
On March 5, 2004, the plaintiff filed a First Amended Class Action Complaint. On May 13, 2004, Judge Lewis A. Kaplan consolidated several actions under master docket and file No. 04cv0030. That same day, Judge Kaplan granted in part and denied in part several motions to appoint lead plaintiff and lead counsel. The law firms of Grant & Eisenhofer and Cohen, Milstein, Hausfeld & Toll were appointed co-lead counsel. On May 25, 2005, Judge Kaplan signed an Amended Order further granting motions to appoint lead plaintiff. On October 20, 2004, the lead plaintiffs filed a First Amended Consolidated Class Action Complaint. On December 13, 2004, the case was transferred to Multidistrict Litigation and consolidated with 1:04-md-1653. In January 2005, the defendants filed various motions to dismiss.
In a press release dated June 28, 2005, the Honorable Lewis A. Kaplan of the United States District Court for the Southern District of New York today issued an opinion upholding various claims asserted by the plaintiffs against certain auditor defendants in the class action relating to the Parmalat securities fraud. Judge Kaplan found that the plaintiffs had adequately stated fraud claims against Deloitte Touche Tohmatsu ("DTT") and Grant Thornton International ("GTI") by virtue of their respective agency relationships with Parmalat's Italian auditors. Judge Kaplan found that the plaintiffs had adequately stated fraud claims against Deloitte Touche Tohmatsu ("DTT") and Grant Thornton International ("GTI") by virtue of their respective agency relationships with Parmalat's Italian auditors, concluding that, "plaintiffs have alleged sufficiently that an agency relationship existed between GTI and GT-Italy and DTT and its members firms that conducted the Parmalat audit ..." and that "(a)s principals they would be responsible for the actions of their agents." The Court also found that plaintiffs had adequately stated claims against GTI as a controlling person of GT-Italy, and against DTT and Deloitte's Chief Executive Officer as controlling persons of Deloitte & Touche LLP and DTT's member firms in Italy.
On August 22, 2005, the lead plaintiffs filed a Second Amended Consolidated Class Action Complaint. The defendants filed various motions to dismiss in September, October and November 2005. These motions were denied in February 2006. On May 30, 2006, the plaintiffs filed a motion to certify the class the class, which was denied on July 21, 2006.
According to a press release dated June 2, 2006, until recently, the class plaintiffs were prevented from filing claims against Parmalat Finanziaria and its subsidiaries and affiliates ("Old Parmalat") due to a stay issued in the Italian bankruptcy proceedings against all creditors, including class plaintiffs, and also a preliminary injunction issued by the U.S. bankruptcy court against all creditors and class plaintiffs. The newly filed complaint allows Parmalat investors who lost billions of dollars in the dairy giant's fraud-soaked collapse to seek claims against the company itself. In October 2005, the court in Parma, Italy issued a decree approving a "composition" or agreement with Old Parmalat's creditors causing Parmalat S.p.A. to formally succeed Old Parmalat and triggering the transfer of Old Parmalat's assets and liabilities to New Parmalat. Thus, unlike U.S. bankruptcy, Parmalat S.p.A., or "New Parmalat" did not get a "fresh start" with its pre-petition debts being discharged. Rather, it emerged with the assets and liabilities of its predecessor companies that were not discharged in the Extraordinary Administration. In its first official prospectus, New Parmalat recognized that plaintiffs in the United States securities class action could assert claims against it in the United States. For these reasons, lead plaintiffs moved for leave to assert federal securities fraud claims against New Parmalat based on the actions of Old Parmalat and its officers, directors, statutory auditors and others prior to Extraordinary Administration. The amended complaint was filed in U.S. District Court for the Southern District of New York. Grant & Eisenhofer represents Parmalat shareholders, including UK-based Hermes Focused Asset Management Europe Ltd. Law firm Cohen Milstein Hausfeld & Toll, P.L.L.C. represents Parmalat's former bondholders.
On July 26, 2006, the plaintiffs filed a Third Amended Consolidated Class Action Complaint was filed. Also that day, the Court issued the Corrected Order denying without prejudice the Plaintiffs' motion for class certification. On September 21, 2006, the Lead Plaintiffs filed a renewed motion for class certification. In October 2006, the defendants filed various motions to dismiss the Third Amended Consolidated Class Action Complaint.
According to a press release dated March 22, 2007, a multi-national notification program began today, as ordered by the United States District Court for the Southern District of New York, to alert investors, brokers, financial institutions, and other nominees who bought the common stock and/or bonds of Parmalat Finanziaria S.p.A. and its subsidiaries and affiliates from January 5, 1999 through and including December 18, 2003 about a USD $50 million partial settlement of a U.S. class action lawsuit about the prices paid for Parmalat common stock and bonds. The lawsuit alleges that Parmalat and numerous other defendants participated in a fraudulent financial scheme, resulting in the understatement of Parmalat's debt by nearly $10 billion and the overstatement of its net assets by over $16 billion. Parmalat ultimately filed for bankruptcy, and the value of its stock and bonds dramatically declined. Several of the defendants have now agreed to settle the case (Banca Nazionale del Lavoro S.p.A. (BNL), Credit Suisse Group, Credit Suisse, Credit Suisse International, and Credit Suisse Secu-rities (Europe) Limited), while the lawsuit proceeds against Parmalat S.p.A. (the successor to Parmalat Finanziaria S.p.A.), financial institutions, two auditing firms, and certain individuals. The Court defined "Class members" in the settlement to include all people and entities who bought Parmalat common stock and/or bonds from January 5, 1999 through and including December 18, 2003, and were damaged thereby, regardless of where such people live or where they pur-chased their Parmalat securities. Notices informing Class members about their legal rights will be mailed, and are scheduled to appear in publications reaching readers in the United States, Italy, and around the world, leading up to a hearing in New York on 19 July 2007, when the Court will consider whether to approve the settlement.
According to a press release dated July 2, 2007, the New York federal judge overseeing the securities class action against Italian dairy giant Parmalat Finanziaria S.p.A. has soundly rejected the company's motion to dismiss the case brought by investors. The investor class seeks to recover billions of dollars in claims against Parmalat tied to a massive and complex accounting fraud that led to its bankruptcy in 2003. Following a corporate reorganization, the management of so-called "New Parmalat" had argued that because the alleged fraud had been committed by the previous entity -- "Old Parmalat" -- investor claims brought in 2004 were invalid. Dismissing that argument, Judge Lewis Kaplan of U.S. District Court for the Southern District of New York, issued a ruling on June 28 that under Italian law, New Parmalat inherited the liabilities of Old Parmalat. Judge Kaplan also rejected New Parmalat's arguments that investor claims were barred by the statute of limitations or because certain lead plaintiffs had asserted claims in Parmalat's reorganization proceedings in Italy.
According to a press release dated July 20, 2007, overruling objections from a slew of financial services firms, a judge has given the green light to a $50 million partial settlement between investment bank Credit Suisse and Italy's Banca Nazionale del Lavoro SpA in the Parmalat securities fraud action. In a sparsely worded order issued Thursday, U.S. District Judge Lewis A. Kaplan granted the class counsels' motion for reimbursement of expenses from the deal, giving no further elaboration on the decision. Under the terms of the deal, which resolves certain claims filed by the Italian dairy king's shareholders, Credit Suisse and BNL will each pay $25 million and make certain changes in their corporate governance, although class members will not see any payout until the case is completely resolved. In addition, the plaintiffs' attorneys will also be reimbursed for $6 million in expenses.
According to a press release dated July 25, 2007, a group of auditors and banks secured a major victory Tuesday when a judge dismissed foreign plaintiffs' claims that they are liable for securities fraud due to alleged roles in aiding bankrupt Italian dairy giant Parmalat SpA's market manipulation. Judge Lewis A. Kaplan of the U.S. District Court for the Southern District of New York dismissed foreign purchasers of Parmalat securities's charges against four financial institutions. Kaplan found that these plaintiffs did not sufficiently argue that the banks had committed culpable actions in the United States, and therefore ruled that the district court lacks subject matter jurisdiction. “Plaintiffs here seek to certify a class of purchasers of Parmalat securities. Some purchasers were domestic; others foreign. Movants seek to dismiss only the claims of the latter. The claimed injuries to American purchasers will be litigated, and the question of whether the securities laws reach the claims of foreign purchasers need not consider the U.S. effect,” Kaplan ruled. The defendants whose motion for dismissal here was successful are the following major financial firms and various of their subsidiaries and officers: Grant Thornton International; Deloitte Touche Tohmatsu; Bank of America Corp.; and Citigroup Inc. The judge ruled that Grant Thornton and Deloitte Touche, whose accused role in Parmalat's alleged fraud involves auditing, lie outside of U.S. jurisdiction because the plaintiffs do not sufficiently accuse them of violating U.S. securities laws in the U.S.
A district court judge has once again refused to alter or overturn his decision to chuck the lawsuits of two bankrupt Parmalat SpA subsidiaries against six of the Italian company's former financial partners. After refusing to reconsider the ruling or allow the plaintiffs to file amended complaints in September, Judge Lewis Kaplan in the U.S. District Court in Manhattan on Tuesday refused to vacate the order. “First, plaintiffs have failed to demonstrate any error of fact or law, let alone any manifest error, either with respect to their dismissal or the denial of leave to amend,” Kaplan said. The trustees for Parmalat USA Corp. and Farmland Dairies LLC also did not point to any clear injustice, the judge added, and the hundreds of pages of new evidence they presented was not sufficient enough to warrant relief. G. Peter Pappas, who administered Parmalat USA's liquidation plan, and Gerald K. Smith, the litigation trustee for Farmland Dairies, also lodged an appeal in the U.S. Court of Appeals for the Second Circuit on Sept. 21, hoping to reinstate their claims against the six financial firms.
According to an article in the Delaware Law Journal on May 21, 2008, Parmalat SpA announced that it has reached an agreement to settle the securities case against it. The agreement calls for Parmalat to issue 10.5 million shares of stock 'for full satisfaction of any and all claims asserted against it in the class action, worldwide,' according to information released by the company earlier this month. Parmalat will also incur up to $1.5 million of the cost of notifying the class members of the settlement. The company said it believes that the settlement is in the best interests of its shareholders to avoid the distraction and expense of further litigation, and reduce uncertainty about the value of its stock. 'We are very pleased with the settlement reached with the company, bringing total investor recovery obtained so far in the Parmalat case to approximately $90 million,' said Stuart Grant, managing partner of Grant & Eisenhofer. 'We will also continue to press claims against other defendants whom we allege defrauded investors over a period of years prior to Parmalat's ultimate collapse in 2003.' The settlement is subject to the approval of the court.
On August 11, 2008 the following third party defendants were dismissed after successfully arguing their motions for summary judgment: Bank of America Corporation, Bank of America, N.A., Banc of America Securities Limited, Citigroup Inc., Citibank, N.A. Eureka Securitisation plc, and Pavia e Ansaldos.
Deloitte & Touche's motion for summary judgment was denied by the court on January 27, 2009. Shortly thereafter, similar motions from Grant Thornton LLP were also denied. On March 2, 2009 the judge entered a Final Judgment and Order of Partial Dismissal against the settling Parmalat defendants. The judge also entered an order granting lead counsels' application for fees and expenses.
On November 20, 2009, the plaintiffs filed a motion for Preliminary Order Concerning Settlement of Claims Against the Deloitte Defendants and the Grant Thornton Defendants. The proposed settlement is in the amount of $15 million, Deloitte Touche has agreed to a $8.5 million settlement and Grant Thornton has agreed to a $6.5 million settlement. On November 24, 2009, Judge Kaplan preliminarily approved the partial settlement and scheduled the Settlement Hearing for March 8, 2010. On March 11, 2010, Judge Lewis A. Kaplan awarded attorneys' fees and expense and signed the Final Judgments and Orders of partial dismissal against concerning class action settlement with the Deloitte Defendants and defendants Grant Thornton International and Grant Thornton International Limited. The case is now closed.