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How it all went sour

F e n·a ri s a l so l aid th e g rou n dwork for a

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Unformatted text preview: F e n·a ri s a l so l aid th e g rou n dwork for a co mp l ex f ina n cin g s c h e m e th rou g h a De l aw a r e co mp a n y c a l l e d B uc o n e r o, th e It a l ia n fo r '' bl ac k h o l e; ' w hi c h C iti g r oup set up f o r P a rm alat i n 19 99 . Buc o n e r o l oa n e d a to t a l of $ 1 37 mil l i o n to a S \v i ss s ub s id i a r y o f Par m alat t ha t th en d i s tr ibu t e d th e mo n e y to ot h e r Parma l at co m p ani es . Bu c one r o r e- ce ived a g u a r a nt ee d re t u rn of a lm os t 6%, p lu s a t ot a l of abou t $ 7 m il l ion i n f ee s for C it- i g r o up. I n hi s laws ui t a g a i n s t C i ti g r o up, w h ich se e k s a wh opp in g $ 1 0 bi l li o n i n dam- ag e s , ban k r u p t cy ad min i s t r a t o r B o n c U a l- leg e s t h at Bu co n e r o w a s u se d t o dr ess up de bt as an eq u i t y i n fu si o n , a n d s ay s t i , e bank m u s t h a ve I mown abo u t Pa r mala t 's t r u e f i- n a n c ial s itu a t i o n. C i tig r o u p de ni es i t , s ay i ng P a rma l at wa s m a k i n g u s e of a p e de c Uy legal t ype of l o w- cost fi n a n cin g s cheme em p loye d b y m a n y o t her Ital i a n co mp a n i e s . Wh a t ' s c l ea r i s t h a t by t he tim e it c o ll a p s e d , P a rm a l a t h a d es t a bli s hed d o ze n s o f a r ra n ge m e n t s inv o l v i ng of fs h o r e c omp a- ni es-a n d b a nk s ea rned hug e co mm i s s i o n s for h e l pin g it do so . A n o f f i cia l a cc oun ti n g by B o nd i s h o w s U, a t €6 . 5 bi ll i on- a lm o s t h a l f o f P a rm a l a t 's to t a l d e bt- wen t to p ay i n t e r es t , c o mmi ss i o n s a n d d i v i d e n d s. O f t h a t , € 2.8 bi l l i o n w e nt to t h e b a nk s alon e . B y 1 995, To rm a a nd oth e r s h a v e to l d ma g i s tr a t es, t h e c o m p a n y was lo s i n g mor e t h a n ·$3 00 mi l li o n a nnua ll y in La tin Am e r i- c a a l o n e . Pa r ma l a t decided t o mov e s o m e o f i t s d eb t o ff U ,e co m pany ' s c o n so l i d a t e d fi- n a n c i a l s t a te m e n t s . It d i d so t h ro u g h thr e e s h e l l c omp a ni es bas e d i n t h e Ca rib b ea n. Th ese fir ms pr e t end ed to se ll Pa rm a l a t pr od u c ts , a nd Parma l a t w o u l d s e nd th e m o ff i c es of acc o u nt a nt s D e l o itt e & T o u c h e, f i l ed a n i nt e r n a l ' lear l y war n in g re po rt " ex- p r es si n g ser io u s c on c e rn s a b out P an n a l a t ' s Latin A m eric a n o p e r a ti o n s . H e pe p pe r ed t he c o m pan y w i t h s o m a n y q u est io ns th a t C F O T o n na l o s t hi s t e mp e r . Th e r e q u e st s f o r in for m a t i o n a r e " o f fe n s iv e a n d r i dic u lous:' T o n n a thund ere d i n a Ju n e 9, 2 , fa x t o A dol f o lv I am o li , t h e D e l o i tt e p a r t n er in M i- lan, a n d t e r m inat e d D e l o itt e ' s Pan m a l a t b u s i- ness i n Ar gen t i n a. D e l o i t t e- w hi c h h a d t ak- e n over a s Pa n m a l a t ' s w or l dw i de a u...
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