Pension Fund Files Parmalat Suit

January 14, 2004 ( - An Alaska carpenters union pension fund has filed a lawsuit alleging securities fraud at besieged Italian dairy firm Parmalat.

The 2,000-member retirement fund of theSouth Alaskan Miners’ Pension Fundsays 12,000 shares of Parmalat were purchased last summer for $40,000.   After watching the stock soar to a recent high of $2.36, Parmalat has come crashing down to Earth in the midst of a massive accounting scandal, falling as low as $0.11 a share, according to a USA TODAY report.

Last Friday the retirement fund filed a federal securities fraud suit against Parmalat andits current auditor in Italy, Deloitte & Touche; and its former auditor there, Grant Thorntonand Citicorpin New York.   The suit, which seeks class-action status, charges the conglomerate sold more than $5 billion in overvalued securities to investors.

“Depending on whose story you hear and which day you hear it, their investment appears to be worthless now,” Darren Robbins, a lawyer representing the retirement plan told USA TODAY. “They’re not too happy about it.”  

Among the focus of the lawsuit, Robbins told Executive Intelligence Review is an offshore “mail-box” firm that Parmalat used to channel the liquidity coming from the bond sales called Buconero, which translates to “black hole.”   “We believe that Citigroup, by creating instruments like the sadly famous ‘Buconero,’ has played a fundamental role in helping Parmalat to fake their balance sheets and hide their real financial situation,” Robbins told Executive Intelligence Review.

The carpenters union may not be alone in legal action for long, Robbins said.   Other US institutional investors who lost money in Parmalat stock or bonds, including an unnamed Florida-based pension fund, are in talks to join the union’s lawsuit.

The Parmalat scandal may touch more than just pension funds in America’s pension coffers.   Fifty-nine US-based international mutual funds reported holdings of nearly $100 million in Parmalat stock during 2003, the USA TODAY report said.  Top stockholders in Parmalat prior to the accounting scandal’s impact were the Bernstein Tax-Managed International Value fund, with shares valued at more than $25 million, and a Putnam International Capital fund with a stake of more than $14 million.