Auditors Multiply Parmalat’s Debt by 8

Parmalat last fall had negligible liquid assets and owed creditors $17.9 billion, more than eight times the amount reported by the Italian dairy conglomerate at the time, auditors reported Monday.

The company originally put its net debt as of Sept. 30 at $2.2 billion. Monday’s revised debt figure was largely in line with estimates cited by some investigators in the early weeks of Parmalat’s accounting scandal.

Also Monday, investigating magistrates questioned Parmalat founder Calisto Tanzi in a Milan prison. Tanzi is one of 10 people imprisoned as investigators look into the case.

The scandal exploded in December after the company admitted that it did not have a nearly $5-billion account with Bank of America as Parmalat had stated in September. Bank of America has said that the letter testifying to the account is a forgery.

PricewaterhouseCoopers performed the latest audit.

Parmalat said the figures released Monday came from a draft report and were “subject to change” but were being released in agreement with Italy’s industry minister to provide the Milan stock market with “timely information.”

Parmalat said the latest audit showed that liquid assets at the end of 2002 and as of Sept. 30, 2003, were “negligible.”

With operations in 30 countries, the scandal at the Parma, Italy-based dairy and juice giant has sparked concern among suppliers and employees in North and South America and elsewhere that debts and salaries might go unpaid.

In a statement about the latest audit, Parmalat said it was “in a condition to make ongoing payments, although there have been a few exceptions,” including dairy businesses in the United States and Brazil.

New Jersey dairy farmers have asked their state to help protect them from potential losses from the scandal fallout. In Brazil, Parmalat’s subsidiary, that country’s second-largest milk buyer, is struggling to survive.

Parmalat said that, in troubled situations, “task forces are already at work with the aim of helping local management to limit their financial requirements and to reach agreements with their local financing banks.”

Investigators have said they believe that at least some of the previously unreported debt was linked to huge infusions of cash from the dairy company to tourism businesses owned by the Tanzi family.

Parmalat plants in Italy have continued to regularly produce milk, yogurt and other food items, and the company said Monday that its products showed an “overall positive trend” at the start of this year, including milk sales, which rose 14% from a year earlier.

It was not clear how much of the sales increase was due to steep discounts on Parmalat products like yogurt on the supermarket shelves in Italy this month.

The company said that when the audit report was final, the findings would “form the basis for the industrial, economic and financial restructuring of the Parmalat Group.”

Parmalat was ranked as Italy’s eighth-largest company when scandal engulfed it.