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Parmalat Founder Admits Financial Fraud - 2003-12-30

The founder of troubled Italian food giant Parmalat, Calisto Tanzi, who is under arrest for suspected financial crimes, has admitted he diverted huge amounts of funds from the company.

Parmalat founder Calisto Tanzi has admitted misappropriating hundreds of millions of dollars from the company during seven or eight years of alleged fraudulent transactions. Mr. Tanzi's lawyer said his client made the admission during questioning Monday in the Milan prison.

Although no charges have yet been brought against Mr. Tanzi, he is expected to face charges including market rigging, false auditing, and fraudulent bankruptcy.

The firm was declared insolvent after the discovery of a massive hole in its accounts. Milan's stock market suspended trading in Parmalat shares on Monday.

Mr. Tanzi has so far been defending himself, saying that he stole no money, but merely kept covering up the company's worsening financial situation, which he hid from shareholders.

Parmalat is currently being run by an Italian government-appointed rescue administrator, so it can continue operations and pay its suppliers. Among them are Italian dairy farmers who are owed large amounts of money.

While investigations continue into what caused the financial disaster, Parmalat has been able to put its financial creditors on hold.

The company's administrator has six months to draw up a recovery plan. But the fate of its 35,000 employees worldwide remains unclear.

To add to Parmalat's woes, the U.S. Securities and Exchange Commission accused the company of fraud for filing misleading financial statements during 2002 and 2003.

The SEC filed a civil suit in a New York court Monday, claiming Parmalat had engaged in one of the largest and most brazen corporate financial frauds in history.