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Citigroup, Riggs Bank helped Chile''s former dictator launder money abroad
Citigroup, Morgan Stanley Named in Parmalat Probe
By Clara Ferreira-Marques and Giada Zampano
Reuters
Thursday, March 17, 2005
http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=7936509
MILAN -- Prosecutors investigating the Parmalat scandal have accused
four foreign banks and an Italian asset management firm of helping
the dairy foods giant mislead investors, moving closer toward a
possible trial.
The prosecutors made the accusations on Thursday against U.S. banks
Citigroup Inc. and Morgan Stanley, Germany's Deutsche Bank, Swiss
bank UBS, and Nextra, the asset management arm of Italy's Banca
Intesa.
In the report, seen by Reuters, the prosecutors also accused 13 bank
executives, including an employee of Credit Suisse First Boston, of
the Italian crime of market rigging.
Parmalat collapsed under 14 billion euros ($18.7 billion) of debt in
late 2003, triggering one of the world's biggest financial scandals.
A spokeswoman at Citigroup said the claim "if pursued against
Citigroup cannot be proven." UBS said its actions were legal and
that any proceedings would be "vigorously defended."
Morgan Stanley said there was "no factual or legal basis for seeking
any indictment." CSFB declined to comment.
Deutsche Bank denied any wrongdoing and said it fully supported its
employees in the matter.
Nextra was not available for comment.
The banks have previously denied wrongdoing.
In a separate action in a New Jersey state court on Thursday,
Citigroup countersued newly installed Parmalat Chief Executive
Officer Enrico Bondi, accusing him in his capacity as the dairy
company's representative of fraud, taking money owed to the world's
largest bank, and negligent misrepresentation.
The prosecutors in Milan last year closed an initial inquiry, asking
a judge to put on trial nearly 30 ex-Parmalat executives, auditors,
and bankers plus three financial institutions.
The same prosecutors have been looking for months into whether banks
helped Parmalat to mislead financial markets to help it raise
billions of euros in now nearly worthless bonds.
Thursday's end of the probe into the banks, which had been expected
last year, paves the way for prosecutors to request a separate trial
for them.
Several of the financial institutions are set to become key
shareholders in a new, slimmed-down Parmalat when it relists after a
12 billion-euro ($16 billion) debt-for-equity swap.
Under Italian law, the prosecutors' report must now be sent to the
companies and the individuals accused. They then have 20 days to ask
for more documents and further investigation.
After that, prosecutors can recommend that the executives and the
banks stand trial. If a judge approves the request, they will be
charged with the crimes in question.
Market rigging, or issuing false information that alters the price
of bonds and shares, carries a basic jail sentence of up to five
years, which can be increased if counts are multiple.
But sending people to prison in Italy is complicated by a long
appeal process. Few served time after the 1990s "Clean Hands"
corruption probes that wiped out a political generation.
Companies cannot be served with jail sentences but they can be fined
or have their businesses suspended or shut down.
In the earlier inquiry -- into possible market rigging, false
auditing, and regulatory obstruction -- they called for 29
executives plus Bank of America , auditing firm Deloitte & Touche,
and the former Italian affiliate of Grant Thornton to stand trial.
Those companies have also denied wrongdoing.
Since then, two individual auditors have been sent to trial. A
further 27 people and the three institutions are still in the
preliminary phase of their hearings.
Prosecutors in Parma, where Parmalat is based, are conducting a
separate probe that focuses on possible fraud within the company
with the involvement of banks. They are set to close their inquiry
at the end of March.
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