Trial begins in Parmalat case vs Citigroup

By Martha Graybow

HACKENSACK, New Jersey (Reuters) - Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) is responsible for helping spur the meltdown of Parmalat SpA (PLT.MI: Quote, Profile, Research, Stock Buzz) 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.