Parmalat Vs. Enron - Italian Justice?

[Craig Read]

Both frauds are about the same size - U$11 billion. Enron was shut down, its top executives now in the courts [albeit far too slowly]. The company is being liquidated its assets used to pay off creditors.

Ironically, given the insinuations of crony capitalism leveled against the Bush administration during the collapse and since, not a political finger was lifted to help the Texas energy giant, which is still negotiating an exit from Chapter 11 reorganization. Enron's and WorldCom's very bankruptcies were proof of the absence of crony capitalism.

And Parmalat ? In good EU style the Italian state will ensure it survives.

Credit Lyonnais, Bertlesman, AG Metallgeshaft, Vivendi, A-Hold, Sabena, Swiss Air, and the list goes on - all bailed out by the taxpayer.

Re Parmalat, last week the Italian government requested that the entire Italian dairy sector be granted "crisis" status by the European Commission. This would allow the Italian state to do pretty much what it wants to prop up anyone from farmers to milkmaids within the sector. All this for the sake of a company that seems to have "misplaced" $11 billion worth of assets. While details trickle out, the broad outlines are clear -- and the scale of the alleged deception is shocking.

$5billion in Cash has magically disappeared from the balance sheet.

Yet it would seem that the biggest problem at Parmalat was prosaic -- the business was no good. Given the seemingly total lack of cash, one suspects the business hasn't made money in years. Of course, management could have been stuffing it into mattresses. On Monday the Italian press reported that Mr. Tanzi may stand accused of "misappropriating" $1 billion in company funds, a charge his lawyer denies; but since he and his family own a controlling interest in Parmalat, it seems unlikely they would have set out to destroy the family business on purpose -- destroying billions of their own net worth in the process

But count on the EU and Berlusconi to bail out Parmalat. Buying votes is easier than restructuring your industry.

This is one reason why the EU will fail.