A U.S. federal judge in Manhattan has dismissed three Parmalat SpA
Friday's ruling by U.S. District Judge Lewis Kaplan is a setback for Parmalat and its chief executive Enrico Bondi, who has filed dozens of lawsuits against banks and auditors, including Citigroup Inc
Parmalat said in a statement that it believed the decision was erroneous, and that it intends to appeal.
Burdened by about 14 billion euros ($20.6 billion) of debt, Parmalat filed for insolvency protection in Italy in December 2003. It collapsed after uncovering a 4 billion euro ($5.9 billion) hole in its balance sheet. Parmalat was restructured and relisted on the Milan bourse in 2005, and Italian prosecutors filed criminal charges against various executives.
In the current cases, Bondi and the unit Parmalat Capital Finance Ltd each sued Grant Thornton, accusing it of helping set up fake transactions to help insiders steal from the company.
Parmalat Capital made similar claims in a separate lawsuit against Bank of America, over transactions it said also generated more than $800 million for the Italian company.
The defendants argued, however, that they should prevail under a legal doctrine that prevents a company from recovering for its own fraud.
In his 45-page opinion, Kaplan said Parmalat and Parmalat Capital officers had been acting within the scope of their employment when they engaged in a massive fraud that ended with the company's collapse.
He rejected the plaintiffs' argument that the officers' looting and squandering even a small portion of corporate assets would create an exception to the rule, and allow the new Parmalat to recover for the old Parmalat's wrongdoing.
Plaintiffs simply cannot get around the fact that Parmalat, by means of the transactions complained of, raised and spent millions of euros for corporate purposes, Kaplan wrote. The actions of its agents in so doing were in furtherance of the company's interests even if some of the agents intended at the time they assisted in raising the money to steal some of it.
Bank of America spokesman Timothy Gilles said the largest U.S. bank was pleased with the ruling, adding that it had no knowledge of the fraud and was damaged by it.
Grant Thornton spokeswoman Kristi Grgeta said that company was very pleased that this ends the case against us in front of Judge Kaplan.
Bondi has through his lawsuits recovered several hundred million dollars for Parmalat, including $100 million from Bank of America in a separate part of the litigation.
The case is In re Parmalat Securities Litigation, U.S. District Court, Southern District of New York (Manhattan), No. 04-1653.
(1 euro = $1.472)
(Reporting by Jonathan Stempel; Additional reporting by Jo Winterbottom in Milan; Editing by Toni Reinhold)