Parmalat founder faces 'rigging' quiz

CALISTO Tanzi, the founder and chief executive of Parmalat being questioned by police on fraud allegations, faces further accusations of market rigging and making false statements to regulators.

An Italian judge refused requests by Tanzi's lawyer to free his client or place him under house arrest.

Parmalat entered bankruptcy protection on Saturday under provisions similar to America's Chapter 11. The company will continue operating while trying to restructure its debt.

Prosecutors have questioned Tanzi for the first time since his arrest on Saturday. He is under investigation in both Milan and Parma, where the company is based.

Parma prosecutors have accused Tanzi of fraudulent bankruptcy, an offence that carries a sentence of up to 20 years.

There were few details of Tanzi's interrogation, although his lawyer, Michele Ributti, told State broadcaster RAI that he had explained his role in Parmalat's operations.

Ributti was asked about 'missing money' from the Parmalat accounts, but said there was none and, at most, there were 'non-existent assets' listed on Parmalat's balance sheet.

But Italian police say there could be a hole of as much as £7bn after false accounting over some 15 years. The company has debts of at least £4bn. The fallout from the scandal, which is being dubbed Europe's Enron, continues with the Italian government under increasing pressure to reform business laws and their enforcement.

The Italian Treasury has proposed creating a powerful new regulatory body by transforming market watchdog Consob, which has only weak enforcement powers.

Meanwhile, the Italian unit of US auditor Grant Thornton is suing the newspaper Il Giornale for defamation over an article on its role in the collapse.

The paper claimed Grant Thornton was under investigation for false auditing, but the firm said in a statement that the article was false and gravely damaging to its reputation, and that neither the auditor's chairman nor one of its partners were investigated by Milan prosecutors as the paper claimed.

However, Il Giornale and the author of the report, journalist Gianluigi Nuzzi, stand by the story.

Public prosecutors have named about 20 people in the investigations, including unnamed outside auditors. Grant Thornton claims it was a victim of the company's fraud itself as auditor to 18 of 200 Parmalat subsidiaries.