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Italy judge charges four banks in connection with Parmalat collapse

[JURIST] Citigroup, UBS, Morgan Stanley, and Deutsche Bank [corporate websites] were charged Wednesday in Milan in connection with the collapse of Italian dairy giant Parmalat SpA [corporate website; JURIST news archive]. Judge Cesare Tacconi issued the indictments accusing the banks of a form of criminal negligence for not revealing to the market that Parmalat was not financially healthy. Thirteen employees working in the banks were also individually charged. A lawyer representing approximately 32,000 bondholders who joined the criminal trial as civil parties after losing money from Parmalat's bankruptcy told AP that the addition of the banks as defendants could result in a recovery of approximately $400 million for his clients. The banks have all, at present or in the past, denied wrongdoing.

Parmalat filed for insolvency in December 2003, with about $17.3 billion of debt, after realizing there was a massive $4.9 billion discrepancy in its books. Suits and counter-suits have been filed in both Italy and the US against a number of parties, including Citigroup [JURIST report], Parmalat's former auditors [press release, PDF], and Bank of America [corporate website; JURIST report]. Bank of America, which was not charged in Wednesday's proceeding, is pursuing a counterclaim [JURIST report] against Parmalat, alleging that company engaged in fraud and is maliciously suing the bank to try to shift blame. In November, a US district judge directed the companies to seek a settlement [JURIST report]. AP has more.

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