Trial begins in Parmalat case vs Citigroup
HACKENSACK, New Jersey (Reuters) - Citigroup Inc (C.N) is responsible for helping spur the meltdown of Parmalat SpA (PLT.MI) because the bank ignored red flags at the company in a quest for high financial advisory fees and big bonuses for its bankers, a lawyer for the revamped Italian food company told jurors at the opening of a U.S. civil trial on Thursday.
Citigroup is the first defendant to go to trial in the United States over accusations of helping conceal corrupt activity by former Parmalat insiders. Parmalat, which collapsed in December 2003 and emerged from bankruptcy in 2005, is seeking $2.2 billion in damages from the biggest U.S. bank.
Citigroup is seeking $699 million of damages on its own claims, saying it was a victim of Parmalat's fraud.
"This case is about the bank's full knowledge of how it was helping the Parmalat crooked insiders," said Kenneth Chiate, who represents Parmalat's new management, in his opening statement to jurors in a small, tightly packed courtroom.
He said that Citigroup lent money to Parmalat to help the company in covering up its losses and looting by ex-Parmalat insiders. The loans did not show up as debt on Parmalat's balance sheet, "so the world thought that they didn't have as much debt as it (Parmalat) did," he said.
Citigroup's actions were driven by its bankers' hopes of earning high fees, which translated into big bonuses for themselves, he said, citing one e-mail from a Citigroup employee congratulating his colleagues on one deal and the expected fees they were set to earn.
Citigroup is expected to present its opening statements later in the day in the trial held in Bergen County Superior Court, about 15 miles from Manhattan in Hackensack, New Jersey.
Most in the jury of two men and six women, including two alternates, took notes as the lawyer talked.
The trial got under way after the judge dismissed two of the 10 original jurors Thursday morning, after one said she had a conflict of interest and the other because he had medical issues.
The judge rejected a request by Parmalat to add additional jurors, saying that he wanted the case to continue as is.
The trial is expected to take at least two months and involve testimony by about 30 witnesses.
Parmalat is involved in dozens of legal cases in Italy and the United States. Its chief executive, turnaround specialist Enrico Bondi, has accused some 50 defendants of helping prior Parmalat management hide debt and inflate results.
Parmalat, often dubbed "Europe's Enron," collapsed under about 14 billion euros ($21.7 billion) of debt after uncovering a 4 billion euro ($6.2 billion) hole in its accounts. It has restructured and relisted its shares on the Milan stock exchange.
In March, 56 defendants went on trial in Parma, Italy, a case that could run for years. Parmalat founder Calisto Tanzi and former Chief Financial Officer Fausto Tonna are among those who face charges including criminal conspiracy. They have denied wrongdoing.
Parmalat also has sued Bank of America Corp (BAC.N) and auditor Grant Thornton International in the United States. Those cases are expected to go to trial by early 2009.
Another former auditor, Deloitte Touche Tohmatsu DLTE.UL settled in January 2007 for $149 million.
Much of the U.S. litigation has taken place in U.S. District Court in Manhattan, including an investor lawsuit against Parmalat that resulted in a 24 million euro ($37.3 million) settlement announced on May 2.
Citigroup tried unsuccessfully to move the New Jersey case to another court. Parmalat has sought to keep the case in the state, where its U.S. operations had been based.
($1 = 0.645 euro)
(Editing by Lincoln Feast and Dave Zimmerman)
