The black hole, which was expected to trigger Europe’s biggest corporate collapse, and the future of the food group were discussed at a Cabinet meeting of Silvio Berlusconi, the Italian Prime Minister, yesterday, with further talks scheduled for December 23.

The shortfall threw into serious doubt Parmalat’s ability to meet its financial commitments, which included interest and redemption payments for €7 billion worth of bonds.

The ten-member Parmalat board, led by new executive chairman Enrico Bondi, who took the job only last week, was in an emergency meeting in Milan last night.

The black hole emerged after Grant Thornton, one of the group’s auditors, approached Bank of America this week for information about a vital account in the name of a Parmalat subsidiary, Bonlat Financing Corporation.

Bank of America told Grant Thornton that the account did not exist. It also denied the authenticity of a March document which certified the existence of the account. That document formed the basis on which Bonlat’s 2002 accounts were signed off.

It is understood that Bank of America in New York has been in talks with the American regulator, the Securities and Exchange Commission, and has signed a sworn affidavit confirming its position.

Market analysts in Italy have speculated that Signor Bondi may offer his resignation. He was appointed as chairman and chief executive on Tuesday to replace company founder Calisto Tanzi, who stepped down in the wake of Parmalat’s worsening financial position.

There have already been calls for the Italian Government to rescue Parmalat, which employs 36,000 people worldwide, including about 7,000 in Europe.

Parmalat’s woes also refocused attention on the role that auditors have played in corporate collapses. Deloitte Touche Tohmatsu and Grant Thornton were both retained by Parmalat, with the latter responsible for auditing, among others, the Bonlat subsidiary.

Deloitte said it was monitoring the situation closely but drew attention to its mid-year review of Parmalat at the end of October, which raised “certain issues”. Neither Grant Thornton nor Bank of America would comment.

For a company whose corporate motto translates to “life is joy”, this month has been all but joyous. The true extent of Parmalat’s financial problems became apparent only last week. Parmalat was forced to admit that it could not recover almost €500 million from its Cayman Islands-based fund, Epicurum. The news triggered the first massive sell-down of Parmalat shares and bonds and prompted the appointment of Signor Bondi.

On his appointment, Signor Bondi retained PricewaterhouseCoopers to conduct an emergency inquiry into Parmalat’s financial position.

Signor Bondi is a respected company doctor who has been credited with the turnaround of Ferruzzi-Montedison in the 1990s. Many fear he was unaware of Parmalat’s true position when he took on the job and was now reconsidering his position.

The underlying businesses of Parmalat were considered to be sound and should attract buyers.

From small beginnings to big trouble

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