On Monday, prosecutors asked the judge to expand the list of crimes to include fraudulent bankruptcy, a charge that could put Tanzi away for 10 years.
Parmalat, which sells Archway, Mrs. Alison’s and Salerno cookie and snack brands, as well as Farmland, Welsh Farms and Sunnydale milk brands, declared itself insolvent over the weekend. Monday, the Milan stock exchange suspended trading of Parmalat shares.
The scandal, which could top $10 billion, is one of the largest in Europe’s history and could hurt several U.S. insurance companies holding an estimated $1.2 billion in Parmalat’s debt. The collapse also raises serious questions about Italy’s financial accounting standards and corporate-governance rules.
Parmalat’s descent has been compared to that of Texas energy company Enron. Parmalat tried to hide losses using fake assets held by offshore front companies. The losses from Parmalat could total almost 1% of Italy’s gross domestic product, dwarfing, by comparison, the cost of Enron’s debacle.
Tanzi, 65, was expected to spend a second night in San Vittore prison, the holding pen for the country’s politicians and businessmen during the “Clean Hands” corruption scandal in the 1990s. Prosecutors planned to question Tanzi again Tuesday.
“This is a difficult time for him,” Fabio Belloni, one of Tanzi’s lawyers, told reporters waiting outside the prison.
On Monday, Il Giornale newspaper published part of a report by investigating magistrates claiming Tanzi had “diverted in his favor and to companies which are not part of the (Parmalat) group the sum of about 800 million euros” (or about $1 billion).