Parmalat - The Fall of a Dairy Giant

            
 
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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Case Details:

Price:

Case Code : FINC028 For delivery in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Corporate scams / Controversies
Case Length : 14 Pages
Period : 2003 - 2004
Pub. Date : 2004
Teaching Note : Available
Organization : Parmalat Finanziaria SpA
Industry : Dairy Products
Countries : Italy

Abstract:

The case deals with the financial scandal at Parmalat, one of the biggest companies in Italy. Parmalat was among the largest food-based companies in the world, and had a presence in a variety of product categories. Towards the end of 2003, it was revealed that the company had been resorting to fraudulent accounting practices from the late-1980s and had been in the habit of transferring large amounts of money from the Parmalat group to several other overseas subsidiaries or companies owned by the Tanzi family. The scandal came to light only in December 2003, when Parmalat was not in a position to honor a bond payment that had become due, but analysts had been doubtful about the company's accounting practices since 2002.

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

Investigations revealed that Parmalat created assets where none existed and transferred money to its various subsidiaries around the world in a series of complicated derivative transactions. In late December 2003, Parmalat went into controlled administration under the supervision of turnaround expert, Enrico Bondi, and analysts were confident that, under Bondi, the company would manage to turnaround. The Parmalat case was one of the biggest scandals to hit Europe and many analysts took to calling Parmalat 'Europe's Enron'.

Issues:

Analyze the accounting scandal at a large business group. The reasons behind the scandal and the way in which the fraud was committed

Examine the implications of the collapse of the company to the economy in which it operated

Contents:

  Page No.
In the Eye of a Storm 1
Background 2
A Year That Went Wrong 4
How it All Happened 5
The Italian Angle 7
The Road Ahead - Can Parmalat Survive? 7
Exhibits 10

Keywords:

Financial scandal, Parmalat, biggest companies, Italy, food-based, product categories, 2003, fraudulent accounting practices, transferring, money, Parmalat group, overseas subsidiaries, companies, Tanzi family, December 2003, bond payment, analysts, accounting practices, derivative transactions, controlled administration, turnaround expert, Enrico Bondi, Europe, Europe Enron

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