Parmalat Securities Litigation 04-CV-00030-First Amended Consolidated Class Action Complaint

391 Pages·2006·1.58 MB·English

UNITEDSTATES DISTRICTCOURT
SOUTHERN DISTRICTOF NEW YORK
:
: MASTERDOCKET
InrePARMALATSECURITIES LITIGATION :
: 04Civ. 0030(LAK) ECFCase
:
: FIRSTAMENDEDCONSOLIDATED
This document relates to: AllCases
: CLASSACTION COMPLAINTFOR
: VIOLATION OF THE
: FEDERALSECURITIES LAWS
:
:
: ELECTRONICALLYFILED
:
:
DEMANDFOR JURY TRIAL
GRANT & EISENHOFER P.A.
Stuart M. Grant (SG-8157)
JohnC. Kairis
Diane Zilka(DZ-9452)
JohnA. Curseaden (JC-3020)
Chase Manhattan Centre
1201 NorthMarket Street
Wilmington, DE 19801
Tel: [phone]
Fax: [phone]
Co-Lead Counsel for Plaintiffs
Of Counsel: COHEN MILSTEIN HAUSFELD & TOLL
P.L.L.C.
SPECTOR ROSEMAN & KODROFF, P.C. Steven J. Toll
Robert M. Roseman Mark S. Willis
Andrew D. Abranowitz Julie GoldsmithReiser
Rachel E. Kopp Joshua S. Devore
1818 Market Street, 25th Floor 1100 New York Avenue, N.W., Suite 500 West
Philadelphia, PA 19103 Washington, D.C. 20005-3964
Tel: [phone] Tel:[phone]
Fax: [phone] Fax:[phone]
Co-Lead Counsel for Plaintiffs
TABLE OFCONTENTS
I. SOURCE OF THE ALLEGATIONS.................................................................................1
II. INTRODUCTION..............................................................................................................4
A. Overview of the Fraud ............................................................................................4
B. The Fraud in Action................................................................................................7
C. The “Professionals”...............................................................................................14
D. The Endgame ........................................................................................................19
III. JURISDICTION AND VENUE.......................................................................................22
IV. THE PARTIES..................................................................................................................40
A. The Parmalat Group..............................................................................................40
B. Plaintiffs................................................................................................................42
C. Defendants............................................................................................................44
V. DEFENDANTS’ FRAUDULENT SCHEME AND WRONGFUL COURSE OF
CONDUCT.......................................................................................................................68
A. Use of Special Purpose Entities to Record Fictitious Sales – the Evolution of
Bonlat....................................................................................................................71
B. Fictitious Sales of Powdered Milk to Cuba..........................................................82
C. Buconero– The Black Hole..................................................................................86
D. Parmalat’s and Citigroup’s Double Billing And Securitization Scheme..............91
E. Stale Invoices Used In Factoring Scheme With BNL..........................................96
F. Improper Reclassification of Debts as Inter-Company Debts Which Were
Eliminated in the Consolidated Financial Statements........................................100
G. Fictitious Bond Repurchases...............................................................................104
H. Illegal Money Transfers to Tanzi Family Companies........................................105
I. Epicurum.............................................................................................................113
J. Fraudulent Classification of Debt as Equity.......................................................117
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K. Manipulation of Goodwill...................................................................................120
L. The $300 Million “Outside” Investment in Parmalat’s Brazilian Operations....122
M. CSFB’s Scheme for Parmalat to Issue Bonds Through its Brazilian Affiliate But
Never Report That Debt on the Company’s Consolidated Financial Statements126
N. The Misrepresentations in the Sale of Bonds to Nextra.....................................129
O. Fictitious Sales of Trademarks and Other Intellectual Property.........................132
VI. DEFENDANTS’ FALSE AND MISLEADING STATEMENTS DURING THE CLASS
PERIOD..........................................................................................................................135
A. Overview.............................................................................................................135
B. Parmalat’s Statements to the Press Regarding 1998 Results, the 1998 Annual
Report and the March 1999 Notes Offering.......................................................136
C. First Quarter 1999 Results..................................................................................146
D. The June 1999 Notes Offering............................................................................146
E. The August 1999 Notes Offering........................................................................146
F. The 1999 Six Month Report...............................................................................147
G. The September 1999 Notes Offering..................................................................149
H. The November 1999 Notes Offering..................................................................150
I. The December 1999 Notes Offering...................................................................150
J. The February 2000 Notes Offerings ...................................................................151
K. The March 2000 Notes Offering.........................................................................152
L. The 1999 Annual Report.....................................................................................152
M. The 2000 First Quarter Report............................................................................160
N. The June 2000 Notes Offerings..........................................................................162
O. The September 2000 Offering.............................................................................163
P. The 2000 Six Month Report...............................................................................163
Q. 2000 Third Quarter Report..................................................................................165
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R. The October 2000 Notes Offering......................................................................165
S. The February 2001 Notes And Bond Offerings..................................................167
T. The 2000 Annual Report.....................................................................................168
U. The 2001 First Quarter Report............................................................................174
V. The June 2001 Notes Offering............................................................................176
W. The July 2001 Notes Offerings...........................................................................176
X. The August 2001 Offering..................................................................................177
Y. The 2001 First Half Report.................................................................................177
Z. The September 2001 Notes Offering..................................................................180
AA. The 2001 Third Quarter Report..........................................................................180
BB. The December 2001 Notes Offering...................................................................182
CC. The January 2002 Notes Offering.......................................................................183
DD. The February 2002 Notes Offering.....................................................................183
EE. The 2001 Annual Report.....................................................................................184
FF. The 2002 First Quarter Report............................................................................189
GG. The May 2002 Debenture Offering.....................................................................190
HH. The August 2002 Notes Offering........................................................................191
II. The 2002 Half-Year Report................................................................................191
JJ. The 2002 Third Quarter Report..........................................................................195
KK. The December 2002 Notes and Bond Offerings.................................................196
LL. The December 2002 Note Offering....................................................................197
MM. Parmalat’s Statements In February 2003............................................................198
NN. The 2002 Annual Report.....................................................................................200
OO. The 2003 First Quarter Report............................................................................209
PP. The July 2003 Notes Offerings...........................................................................213
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QQ. The August 2003 Notes Offering........................................................................213
RR. The 2003 Half Year Report.................................................................................214
SS. The September 2003 Notes Offering..................................................................227
TT. The 2003 Third Quarter Report..........................................................................227
UU. The November 2003 Offering.............................................................................232
VV. The Fraud Begins to Unravel..............................................................................234
VII. THE TRUTH IS FINALLY REVEALED......................................................................238
A. The Revelations of Fraud Drive The Company Into Bankruptcy.......................238
B. PwC’s Investigation and Reconstruction of Parmalat’s Financial Statements..240
VIII. THE BANK DEFENDANTS’ ROLE IN THE FRAUDULENT SCHEME AND THEIR
SCIENTER......................................................................................................................248
A. Citigroup’s Participation in the Fraudulent Scheme and its Scienter.................249
B. Bank of America’s Participation In The Fraudulent Scheme And Its Scienter..263
C. Credit Suisse First Boston’s Participation In The Fraudulent Scheme And Its
Scienter................................................................................................................271
D. BNL’s Participation In The Fraudulent Scheme And Its Scienter......................274
IX. ZINI’S AND THE LAW FIRM DEFENDANTS’ PARTICIPATION IN THE
FRAUDULENT SCHEME AND SCIENTER...............................................................275
A. Zini’s Complex Scheme to Circumvent Italy’s Antitrust Laws..........................276
B. Zini As Agent For The Law Firm Defendants Controlled Companies That
Engaged In Sham Transactions with Parmalat And Its Affiliates......................277
C. Epicurum Fund....................................................................................................278
D. The Use Of Bonlat to Divert Funds....................................................................279
E. The Role of Zini and The Law Firm Defendants in Diverting Funds for Executive
Bonuses...............................................................................................................280
X. THE INDIVIDUAL DEFENDANTS’ PARTICIPATION IN THE FRAUDULENT
SCHEME AND SCIENTER...........................................................................................281
A. Tanzi....................................................................................................................281
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B. Tonna ..................................................................................................................284
C. Del Soldato..........................................................................................................287
D. G. Tanzi...............................................................................................................289
E. S. Tanzi...............................................................................................................290
F. Ferraris................................................................................................................291
G. Board Of Directors..............................................................................................291
H. Board Of Statutory Auditors...............................................................................293
XI. DELOITTE’S AND GRANT THORNTON’S KNOWING PARTICIPATION IN THE
FRAUDULENT SCHEME.............................................................................................296
A. Introduction And Overview................................................................................296
B. The Auditor Defendants Assist Or Deliberately Ignore Parmalat’s Fraudulent Acts
.............................................................................................................................297
C. Additional Indicators of the Auditor Defendants’ Scienter................................313
XII. CLASS ACTION ALLEGATIONS...............................................................................322
XIII. APPLICABILITY OF PRESUMPTION OF RELIANCE.............................................324
XIV. INAPPLICABILITY OF STATUTORY SAFE HARBOR...........................................326
COUNTIVIOLATION OF SECTION10(B) OF THE EXCHANGEACT AND RULES
10B-5(A) AND 10B-5(C)PROMULGATEDTHEREUNDER(AGAINSTTANZI,DEL
SOLDATO,FERRARIS,G. TANZI,S. TANZI,TONNA,BRUGHERA,FERRETTI,NUTI,
MARTELLINI AND BOCCHI)..............................................................................................327
COUNTIIVIOLATION OF SECTION10(B) OF THE EXCHANGEACT AND RULE
10B-5(B)PROMULGATEDTHEREUNDER(AGAINSTTANZI,DELSOLDATO,
FERRARIS,G. TANZI,S.TANZI,TONNA,BRUGHERA,FERRETTI,NUTI AND
MARTELLINI)...................................................................................................................329
COUNTIIIVIOLATION OF SECTION20(A) OF THE EXCHANGEACT(AGAINST
TANZI,DELSOLDATO,FERRARIS,G. TANZI,S.TANZI,TONNA,BRUGHERA,
FERRETTI,NUTI,MARTELLINI AND BOCCHI)...................................................................331
COUNTIVVIOLATION OF SECTION10(B) OF THE EXCHANGEACT AND RULES
10B-5(A) AND 10B-5(C)PROMULGATEDTHEREUNDER(AGAINSTDELOITTE
TOUCHETOHMATSU,DELOITTE&TOUCHELLP,DELOITTE&TOUCHEUSA
LLP,GRANTTHORNTONINTERNATIONAL,GRANTTHORNTONLLP AND GRANT
THORNTONS.P.A.)...........................................................................................................332
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COUNTVVIOLATION OF SECTION10(B) OF THE EXCHANGEACT AND RULE
10B-5(B)PROMULGATEDTHEREUNDER(AGAINSTDELOITTETOUCHETOHMATSU,
DELOITTE&TOUCHELLP,DELOITTE&TOUCHEUSALLP,GRANTTHORNTON
INTERNATIONAL,GRANTTHORNTONLLP AND GRANTTHORNTONS.P.A.)....................335
COUNTVIVIOLATION OF SECTION20(A) OF THE EXCHANGEACT(AGAINST
DELOITTETOUCHETOHMATSU)......................................................................................337
COUNTVIIVIOLATION OF SECTION20(A) OF THE EXCHANGEACTION
(AGAINSTDELOITTE&TOUCHELLP).............................................................................339
COUNTVIIIVIOLATION OF SECTION20(A) OF THE EXCHANGEACT(AGAINST
JAMESE.COPELAND)......................................................................................................340
COUNTIXVIOLATION OF SECTION20(A) OF THE EXCHANGEACT(AGAINST
GRANTTHORNTONINTERNATIONAL)..............................................................................342
COUNTXVIOLATIONOFSECTION20(A) OF THE EXCHANGEACT(AGAINST
GRANTTHORNTONLLP).................................................................................................344
COUNTXIVIOLATION OF SECTION20(A) OF THE EXCHANGEACT(AGAINST
GRANTTHORNTONS.P.A.) ..............................................................................................345
COUNTXIIVIOLATION OF SECTION10(B) OF THE EXCHANGEACT AND RULES
10B-5(A) AND 10B-5(C)PROMULGATEDTHEREUNDER(AGAINSTCITIGROUPINC.,
CITIBANKN.A.,EUREKAPLC,VIALATTEALLC,BUCONEROLLC,BANK OF
AMERICACORP.,BANK OF AMERICAN.A.,BANC OF AMERICASECURITIESLTD.,
CREDITSUISSEFIRSTBOSTONCORP. AND BANCANAZIONALEDELLAVORO
S.P.A.).............................................................................................................................347
COUNTXIIIVIOLATION OF SECTION10(B) OF THE EXCHANGEACT AND RULE
10B-5(B)PROMULGATEDTHEREUNDER(AGAINSTCITIGROUPINC.,CITIBANK
N.A.,BANK OF AMERICACORP.,BANK OF AMERICAN.A. AND BANC OF
AMERICASECURITIESLTD.)............................................................................................349
COUNTXIVVIOLATION OF SECTION20(A) OF THEEXCHANGEACT(AGAINST
CITIGROUPINC.)..............................................................................................................352
COUNTXVVIOLATION OF SECTION20(A) OF THE EXCHANGEACT(AGAINST
CITIBANKN.A.)...............................................................................................................353
COUNTXVIVIOLATION OF SECTION20(A) OF THE EXCHANGEACT(AGAINST
BANK OF AMERICACORP.)..............................................................................................354
COUNTXVIIVIOLATION OF SECTION20(A) OF THE EXCHANGEACT(AGAINST
BANK OF AMERICAN.A.)................................................................................................356
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COUNTXVIIIVIOLATION OF SECTION20(A) OF THE EXCHANGEACT(AGAINST
BANC OF AMERICASECURITIESLTD.).............................................................................357
COUNTXIXVIOLATION OF SECTION20(A) OF THEEXCHANGEACT(AGAINST
BANCANAZIONALE DEL LAVOROS.P.A.)........................................................................359
COUNTXXVIOLATION OF SECTION10(B) OF THE EXCHANGEACT AND RULES
10B-5(A) AND 10B-5(C)PROMULGATEDTHEREUNDER(AGAINSTBBLPPAVIA E
ANSALDO,ZINI&ASSOCIATESP.C. AND GIANPAOLOZINI)..........................................360
COUNTXXIVIOLATION OF SECTION10(B) OF THE EXCHANGEACT AND RULE
10B-5(B)PROMULGATEDTHEREUNDER(AGAINSTBBLPPAVIA E ANSALDO,ZINI
&ASSOCIATES AND GIANPAOLOZINI)...........................................................................362
COUNTXXIIVIOLATION OF SECTION20(A) OF THE EXCHANGEACT(AGAINST
ZINI)................................................................................................................................364
COUNTXXIIIVIOLATION OF SECTION20(A) OF THE EXCHANGEACT(AGAINST
BBLPPAVIA E ANSALDO)...............................................................................................365
COUNTXXIVVIOLATION OF SECTION20(A) OF THE EXCHANGEACT(AGAINST
ZINI&ASSOCIATES,P.C.)...............................................................................................366
PRAYER FOR RELIEF .............................................................................................................367
JURY DEMAND........................................................................................................................368
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I. SOURCEOF THEALLEGATIONS
1. Plaintiffs Hermes Focus Asset Management Europe, Ltd., Hermes European
Focus Fund I, Hermes European Focus Fund II, Hermes European Focus Fund III, Cattolica
Partecipazioni, S.p.A., Capital & Finance Asset Management, Societe Moderne des
Terrassements Parisiens, Solotrat, Laura J. Sturaitis and Arch Angelus Sturaitis and Paulo
Bianco (collectively, the “Plaintiffs”), on their own behalf and on behalf ofall other purchasers
of securities ofParmalat Finanziaria S.p.A. and its subsidiaries and affiliates (“Parmalat”or the
“Company”) (such purchasers, along with Plaintiffs, are referred to collectively herein as the
“Class”) betweenand includingJanuary5, 1999and December18,2003(the “ClassPeriod”),by
and through their attorneys, allege the following upon informationand belief, except as to those
allegations concerning Plaintiffs, which are alleged upon personal knowledge. Plaintiffs’
information and belief are based upon, among other things, their investigation, through their
counsel, includingwithout limitation:
(a) the unequivocal admissions and confessions of wrongdoing by
members of Parmalat’s Board of Directors and top level of senior
management including, but not limited to, former Parmalat Chief
Executive Officer Calisto Tanzi (“Tanzi”), his son Stefano Tanzi (“S.
Tanzi”), former Parmalat Chief Financial Officers Fausto Tonna
(“Tonna”) and Luciano Del Soldato (“Del Soldato”), former Parmalat
internal accountants Gianfranco Bocchi (“Bocchi”) and Claudio Pessina
(“Pessina”), and former Bank of America bankers Luca Sala (“Sala”) and
Luis Moncada(“Moncada”);
(b) Plaintiffs’ review of internal Parmalat documents including, but not
limited to, communications and other documents relating to Parmalat’s
relationshiptoand businessdealings withthe auditorsand banks namedas
defendants hereinand other thirdparties;
(c) the First Amended Complaint filed bythe United States Securities and
Exchange Commission (“SEC”) against Parmalat in the United States
District Court for the Southern District of New York, styled as Securities
and Exchange Commission v. Parmalat Finanziaria S.p.A., Civil Action
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No. 03 CV10266 (PKC), alleging violations of Section 10(b) of the
Securities Exchange Actof1934;1
(d) the complaint originally filed in the Superior Court ofNew Jerseyby
Dr. Enrico Bondi (“Bondi”), the court-appointed Extraordinary
Commissioner of Parmalat, on behalf of Parmalat, Parmalat S.p.A. and
their subsidiaries and affiliated companies against Citigroup, Inc. and
certain of its affiliates, styled as Bondi v. Citigroup, Inc., et al., and
removed to the UnitedStates DistrictCourt for the DistrictofNewJersey,
DocketNo. 2:04-CV-04373-DMC-MF(the “NewJerseyComplaint”);
(e) the complaint originally filed in the Circuit Court of Cook County,
Illinois by Bondi as Extraordinary Commissioner of and on behalf of
Parmalat, Parmalat S.p.A. and other Parmalat subsidiaries and affiliated
entities against Parmalat’s former auditors, Grant Thornton International,
Grant Thornton LLP, Grant Thornton S.p.A., Deloitte Touche Tohmatsu,
Deloitte & Touche USA LLP, Deloitte & Touche LLP and Deloitte &
Touche S.p.A., styledas Bondiv.Grant Thornton International,et al.,and
removed to the United States District Court for the Northern District of
Illinois, DocketNo. 04-CV-6031(the “Illinois Complaint”);
(f) the complaint filed by Bondi as Extraordinary Commissioner of
Parmalat, Parmalat S.p.A. and other affiliated entities against Bank of
America Corporation, Bank of America National Trust & Savings
Association, Banc of America Securities, LLC, Banc of America
Securities Limited, Bank of America International, Ltd. and Bank of
America,N.A., styledas Bondiv.Bank of AmericaCorp. et al.,pending in
theUnitedStatesDistrictCourt for the WesternDistrictofNorthCarolina,
DocketNo. 1:04-cv-215 (the “NorthCarolina Complaint”);
(g) Plaintiffs’ review and analysis of filings, reports and other documents
and information concerning Parmalat and its various subsidiaries and
affiliates (as described herein) filed with or on record with government
agencies and tribunals including, but not limited to, Italian securities
regulator Commissione Nazionale per le Società e la Borsa (“CONSOB”)
(the Italiancounterpartto the SEC), the CriminalCourtofMilan, Italy,the
CriminalCourtofParma, Italyand the CivilCourt ofParma – Bankruptcy
Division;
(h)aWritofAttachment issuedbythe CourtofParma onJune 21,2004;
(i) the Indictment filed inthe MilanCriminalCourtonMay26, 2004;
1 According to testimony Ethiopis Tafara of SEC Director, Office of International Affairs, given before the House
Financial Services Committee on May 13, 2004, “the SEC has worked closely with the Italian securities regulator
(the Commissione Nazionale per le Società e la Borsa, or ‘CONSOB’) and certain Italian prosecutors’ offices in an
investigation into matters surrounding the collapse of Parmalat S.p.A.”
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