The legal storm unleashed by Parmalat's collapse in 2003 will enter a new phase today when Citigroup becomes the first bank to go to trial in a damages case for its alleged role in the Italian milk company's meltdown.

Enrico Bondi, who was parachuted into Parmalat by the Italian Government after a €14 billion (£11 billion) hole was found in its accounts, is bringing the civil case against Citigroup.

Dr Bondi is understood to be seeking between $2 billion (£1 billion) and $4 billion in damages from Citigroup, which he alleges misled the public by not giving warning of accounting irregularities at Parmalat. He also alleges that by lending Parmalat money the bank perpetuated the diary group's accounting fraud and increased the eventual losses. Citigroup should have known that something was wrong, Mr Bondi says.

Parmalat said: “Citigroup faces a very serious charge at the trial in New Jersey - that its bankers helped the corrupt insiders dress up Parmalat's financial statements and loot the company over a number of years.”

Quinn Emanuel, the law firm representing Dr Bondi, is expected to cite a $137 million loan made by Citigroup to Parmalat as an example of the bank's collusion with the dairy group. He is expected to argue that Citigroup disguised the loan to make it look like an investment.

Speaking in advance of today's case, a spokeswoman for Citigroup said: “Citi is a victim of Parmalat's fraud and is confident that the merits of our position will be demonstrated in court.”

Citigroup declined to comment further. However, Citigroup's lawyers are expected to argue that the bank lost about $700 million from its dealings with Parmalat, partly from the non-repayment of loans, to back up its claim that the bank is a victim in Parmalat's collapse.

Parmalat's failure, known as Europe's Enron, dealt a near-fatal blow to a company that employed 36,000 people in 30 countries and sold food and milk products across the world. A drastically slimmed down version of Parmalat emerged from bankruptcy restructuring and was re-listed on the Italian stock exchange in 2005.

The prosecution and defence are expected to present opening arguments to Judge Jonathan Harris at the New Jersey State Court in Hackensack in the next day or two.

Before then, the judge will oversee jury selection and lay down the ground rules for the trial, which is expected to last about three months.

Dr Bondi, who joined Parmalat as a so-called extraordinary commissioner and is now its chief executive, plans to bring Bank of America and Grant Thornton, the auditor, to trial early next year, following the Citigroup case. They will face broadly similar charges.

Today's trial will follow several out-of-court settlements mainly between European banks and Parmalat, which add up to €1.4billion. The largest of these was a €420 million settlement by Intesa Sanpaolo, the Italian bank.

On Friday, Parmalat announced its own settlement of a US class action by investors in the US District Court in New York. It agreed to pay out shares worth about €24 million.

The principal criminal trial of those involved in the collapse of Parmalat began in Parma last month, at which 55 face charges of bankruptcy, false accounting and criminal association. Calisto Tanzi, the group's 70-year-old founder, his brother Giovanni, and Fausto Tonna, one-time finance director, are among 24 former executives who face charges that carry a maximum prison sentence of 15 years. All deny the charges against them.

In addition to 250 witnesses called by the prosecution, Calisto Tanzi's defence lawyers have listed 35,000 small shareholders who they hope will testify that they were persuaded to buy bonds by banks and not by the company.

Road to disaster

— December 2003: Hole in accounts found

— January 2004: Auditors from Grant Thornton questioned. Founder Carlo Tanzi arrested. US lawsuit filed against Citigroup over its deals with Parmalat

— March 2004: Parmalat agrees a loan package to keep its factories going

— August 2004: Parmalat sues banks including Bank of America and Citigroup, alleging that the banks flattered its finances

— June 2005: Eleven Parmalat executives and a lawyer convicted of market-rigging

— June 2007: Parmalat reached a total of €72million of out-of-court settlements with Merrill Lynch, Banca Monte Parma and ING, of the Netherlands

— December 2007: Parmalat reaches a €420million out-of-court settlement with Intesa Sanpaolo, of Italy

— March 2008: The main criminal trial of Parmalat's collapse begins, with Calisto Tanzi, the company's founder, among the 55 defendents facing charges of fraud, false accounting and criminal association

— Today: Citigroup trial begins in Hackensack, New Jersey

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