In Your Face

Parmalat, Europe’s Enron

The fraud at Parmalat (once Italy’s largest dairy company) is said to be Europe’s Enron. It seems that payments were siphoned off from Parmalat to prop up a failing travel business, which was owned by the founding family.

The fraud was “hidden” from the gaze of the outside world by using two sets of books; and by falsifying the accounts of Bonlat, a Cayman Island subsidiary (I really do not trust companies that use offshore accounting; take a very long hard look at any company that employs this practice see "The Hidden Dangers of Offshore Companies").

Bonlat claimed to have £2.7BN deposited with the Bank of America; however, this turns out to be no more than false accounting.

One interesting aspect of this case is the order alleged to have been given by Luciano Del Soldato, a Finance Director in Parmalat, to Gianfranco Bocchi a Parmalat executive. By all accounts, Soldato ordered Bocchi to destroy the computer that housed the false accounts of Bonlat with a hammer.

At first sight this may seem “a tad extreme”; after all, those denizens of probity at Andersens and Enron only ordered that documents be shredded when the outside world started to investigate their nefarious activities (see In Place of Strife). However, as an experienced fraud investigator I can tell you that this was in fact an eminently sensible order.

Computers have an annoying habit of recording all activity on their hard disc. Although they possess delete buttons which, when the innocent user presses them, “delete” the file from the visible area of the system; the reality is that the crafty computer still stores the information on its hard disc. Any self respecting IT hacker, or professional can resurrect this data in a matter of hours.

To counteract this problem, anyone who wishes to erase traces of data from their computer systems must destroy the hard disc with hammer and fire; ie crush the hard disc then burn it. Soldato’s orders were not extreme, he knew exactly what he was doing.