ParmalatParmalatByBy

Antonia FicovaAntonia FicovaAllen TungAllen Tung

Norman YauNorman YauVijay Shakti AggarwalVijay Shakti Aggarwal

August 7, 2012August 7, 2012

UC, BerkeleyUGBA 127 – Fraud and Forensics

• Bengal Tiger standing in a bamboo forestBengal Tiger standing in a bamboo forest,,

• Look for “The Hidden Tiger” in the image below.Look for “The Hidden Tiger” in the image below.

Critical Thinking: The Hidden Tiger Problem

UGBA 127 – Fraud and Forensics; 2012

• FFoundedounded:: 1961 by defendant Calisto 1961 by defendant Calisto TanziTanzi,,

• Production:Production: long-life milk long-life milk, juices, , juices, baked goods,baked goods,

• TType of ype of FFraudraud: : securities fraudsecurities fraud,, • Total debt: understated $10 bTotal debt: understated $10 bnn and its and its

consolidated total net assets by $16.4 consolidated total net assets by $16.4 bbn,n,

• Beginning of the fraud: Beginning of the fraud: 19971997; ; international acquisitions financed international acquisitions financed through debtthrough debt,,

• Result: Result: dirty dealsdirty deals with with international international banksbanks..

Company Fraud

UGBA 127 – Fraud and Forensics; 2012

• Who commited the fraud? Who commited the fraud? Tanzi, Parmalat’s former CEO; Tanzi, Parmalat’s former CEO; Tonna, Parmalat’s CFO,Tonna, Parmalat’s CFO,

• Liability concealment and Liability concealment and understatement.understatement.

• Failure of auditors and creditors.Failure of auditors and creditors.

• Weak internal controls within Weak internal controls within Parmalat. Parmalat.

• Rationalization of fraud.Rationalization of fraud.

Committed & Concealed Fraud

UGBA 127 – Fraud and Forensics; 2012

Externally

- Auditors: more professional skepticism,

- Long standing audit partners: be scrutinized,

- Audit procedures: followed to a tee,

Internally

- Internal control mechanisms should not be staffed by related parties,

Implications for: auditing firms, U.S. pension funds, U.S. dairy farmers

Detecting the Fraud

UGBA 127 – Fraud and Forensics; 2012

Antonia FicovaAllen Tung

Norman YauVijay Shakti Aggarwal

August 7, 2012

Thank you for attention!

GROUP TERM PROJECTThe case of Parmalat

UC, BerkeleyWalter A. Haas School of Business; 2012