Parmalat bondholders emptyhanded from Milan trial

A court's ruling that Parmalat's founder bore the brunt of the responsibility for the dairy company's stunning 2003 bankruptcy disappointed millions of ordinary investors hoping to squeeze damages from the banks that had sold them bad Parmalat bonds.

A Milan court on Thursday convicted Calisto Tanzi of market-rigging and other charges, sentencing him to 10 years, but acquitted seven other remaining defendants in the trial, including three former Bank of America employees.

The first verdicts assigning responsibility for what remains Europe's largest corporate failure came five years after Parmalat collapsed under crushing debt of euro14 billion ($19.5 billion) _ eight times what it had disclosed to investors.

Lawyers representing 40,000 defrauded bondholders were disappointed that the court did not give them the possibility to seek compensation directly from Tanzi, as they would have from banks and other financial institutions in the case of a guilty verdict.

"We won't get anything, because Tanzi used a lot of nice words, giving fault to the banks, but he never offered any restitution, not even symbolic," said Marisa Costelli, a lawyer for the consumer advocacy group Adusbef. "We have a sentence we can hang on the wall like a painting ... Even if we find one day that Tanzi has a little treasure, or a big treasure, we can't get it without a civil case."

Carlo Federico Grosso, a lawyer representing 32,000 bondholders, said he'd have preferred convictions for the former Bank of America employees "from a financial and economic point of view."

"But that didn't happen because according to the court's view, Bank of America didn't agree to market-rigging with Tanzi."

The banks have always denied wrongdoing, claiming they were equally duped as the investors.

Tanzi, meanwhile, blamed the banks for the labyrinth of shaky deals that on the one hand helped the once simple dairy business grow into a global empire with operations in more than 30 countries, and on the other, led to its collapse. He has always denied having a secret account where the lost investments are stashed.

Bondholders also are seeking damages in two other trials: one against the banks under way in Milan and the other being the highest-stakes case, charging Tanzi and others of fraudulent bankruptcy, in Parma, Parmalat's headquarters.

Tanzi, who turned 70 last month, likely won't have to serve prison time since defendants his age usually are spared jail in Italy. While seven were acquitted Thursday, two others will have their fate decided separately next year. Another 20 received plea agreements in earlier phases, including former CFO Fausto Tonna, who was sentenced to 2 1/2 years.

Tanzi reportedly was shocked at being the only one convicted, according to remarks to his lawyers that were reported by the Ansa news agency. "The sentence seems too high in relation to my responsibility," Tanzi reportedly said. His lawyers could not be reached for confirmation.

While coming out of Milan market-rigging empty-handed, Grosso said his clients have already recouped 16 percent of their initial investment _ which totaled euro400 million ($584 million) for the 32,000 investors _ in out-of-court settlements with the accounting firm Deloitte&Touche, UBS, Deutsche Bank and Morgan Stanley.

"It turned out to be a good choice," to seek out-of-court settlements, Grosso said.

Costelli said that Adusbef's clients will received between 4 percent and 6 percent of their investments in a deal with Deloitte&Touche, and that they were still negotiating with UBS, Deutsche Bank and Morgan Stanely.

There remains a possibility to receive damages in the market-rigging case from the auditor Italaudit, formerly Grant Thorton, but Costelli said that remains thin because Italaudit has solvency issues of its own. The judicial fate of two Italaudit defendants will be decided in February, after the court rejected plea bargain attempts as inadequate.

The new Parmalat, which reorganized and relisted on the Milan stock exchange, separately has collected some euro1.9 billion ($2.78 billion) to date in damages in a settlements, clawbacks and lawsuits. Shares of Parmalat were trading down slightly at euro1.21 ($1.77).