UPDATE 1-Italy court upholds U.S. ruling on Parmalat damages to Citibank

Thu Sep 4, 2014 12:19pm EDT

(Adds comment from lawyers, details, background)

By Stephen Jewkes and Elisa Anzolin

MILAN, Sept 4 (Reuters) - An Italian court has upheld a ruling by a U.S. court for Italy's Parmalat to pay Citibank $431 million in damages in a case relating to the dairy group's bankruptcy more than 10 years ago, lawyers for the U.S. bank said on Thursday.

Parmalat collapsed in 2003 after the discovery of a 14 billion euro ($18 billion) hole in its accounts. At the time it was Europe's biggest bankruptcy and its demise wiped out the savings of more than 100,000 small investors.

In 2008 the Superior Court of New Jersey threw out a lawsuit brought by Parmalat claiming Citibank had played a part in thefts that had helped bankrupt it.

Instead the court ruled Parmalat had to pay the New York-based bank damages for false statements and fraud.

"Following the demand by Citibank for recognition (of the U.S. ruling) in Italy, the Bologna Court of Appeal has now ruled that the U.S. sentence be recognised in Italy against Parmalat...", Citi's lawyers Clifford Chance said.

Parmalat emerged from bankruptcy and returned to the Italian stock market in 2005 after a two-year reorganization.

In 2011 it was taken over by French dairy company Lactalis in a 4.3 billion euro deal.

Citibank now has to file an application with the Parma bankruptcy court in Italy asking it to verify its claim, the lawyers said.

If the claim is upheld by the Parma court the damages will have to be paid to the U.S. bank in Parmalat shares.

It was not clear if the whole amount would have to be paid or only a part. Lawyers for Clifford Chance said there was a chance that Parmalat would be called on to pay the full amount of $431 million.

Parmalat said the company had the right to appeal the decision to the Italian supreme court. (1 US dollar = 0.7680 euro) (Reporting by Stephen Jewkes; editing by Oleg Vukmanovic and Susan Thomas)

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