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Key Parmalat suspect is questioned

Amid turmoil, turnaround team seeks prompt loan

ROME -- Prosecutors looking into the missing millions at dairy giant Parmalat grilled a key suspect who previously acknowledged that management systematically manipulated balance sheets. Meanwhile, a business-turnaround team that has taken control of the conglomerate was seeking a fast infusion of cash from bankers to keep Parmalat operations going.

Former Parmalat chief financial officer Fausto Tonna, one of eight people arrested in the wake of Parmalat's collapse, was questioned behind closed doors for several hours yesterday.

The company's founder, Calisto Tanzi, is jailed in Milan, and has acknowledged some responsibility in the case but says his underlings carried out the most blatant fraud.

Parmalat SpA entered bankruptcy protection last month, and reports say the chief of the restructuring effort, Enrico Bondi, is seeking a bank loan of $125 million to keep the company going while it restructures. A lawyer in Bondi's team held talks with officials at merchant bank Mediobanca in Milan yesterday, the company said.

Bondi was put in charge at Parmalat after the company, based in the northern city of Parma, acknowledged on Dec. 19 that it didn't have $4.9 billion in a Bank of America account as it had previously claimed. The bank says a letter confirming the money was forged.

Since then, the case has expanded rapidly, with the arrests of Tanzi, Tonna, and six others, and bringing a onetime proud symbol of Italian industry to its knees. Parmalat -- known best for its dairy products, juices, and Archway cookies -- has operations in 30 countries and employs about 36,000.

Estimates of the company's debts have ballooned since the scandal broke, with some as high as $16 billion.

Investigators are trying to figure out what happened to the money. Suspects have said funds were shifted around to save struggling company units, while false documents were issued to hide losses.

In previous comments to Milan prosecutors, Tonna said, "Four times a year, the system of putting together false documents was activated on the occasion of the four balance sheet operations that the company had."

The news agency ANSA said that during his questioning, Tonna provided information on documents recently obtained in searches in Parma and in New York.

On Dec. 31, investigators for the district attorney's office in Manhattan searched the New York City offices and home of Parmalat lawyer Gian Paolo Zini, a source close to the investigation said in New York. Zini is among those imprisoned in Italy.

"They removed more than 20 boxes of records," taking only documents that had the word "Parmalat" on them, the source said. The seizures were carried out at the request of Italian authorities, relayed through the US Securities and Exchange Commission, the source said.

Last week, the associate director of enforcement for the SEC, Lawrence West, met with Italian investigators after the US regulator filed a civil suit against the Italian company.

Also yesterday, the investigation widened as the Dutch market regulator said it was investigating three Parmalat units there: Parmalat Netherlands BV, Parmalat Finance Corporation BV, and Parmalat Capital Netherlands BV, all based in Rotterdam.

"We are looking into this case as to where it touches our jurisdiction, such as the offering of securities in the Netherlands," said Werner van Bastelaar, spokesman for the Dutch market regulator Authority for Financial Markets. In addition to the eight people in custody, one suspect remains at large, the ex-president of Parmalat's Venezuelan subsidiary, Giovanni Bonici. He flew back to Caracas after speaking with Italian prosecutors in December, and has remained there despite the arrest warrant.

In the United States, a law firm involved in previous class-action claims said it was filing suit in New York against Tanzi, Tonna, and outside financial services and auditing firms. Milberg Weiss Bershad Hynes & Lerach LLP lawyer Darren J. Robbins said by phone from San Diego that the suit sought "in excess of a billion dollars." The suit seeks damages as well as the personal repayment by Tanzi and Tonna of any funds they illegally diverted.

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