Bank of America settles Parmalat suit for $100M
CHARLOTTE, N.C. — Bank of America Corp. said Tuesday it will pay nearly $100 million to Parmalat SpA and its affiliates to settle lawsuits surrounding the Italian dairy company’s bankruptcy in 2003.
Complaints in both countries alleged the U.S. bank knew of Parmalat’s financial troubles, but nevertheless sold investors Parmalat bonds that ultimately soured — allegations Bank of America continues to deny.
The $100 million payment is a mix of cash and a non-cash component, the bank said. Details of the agreement will become available after it is filed in U.S. District Court in New York.
Parmalat had sought $10 billion in multiple claims in a lawsuit filed in 2004, arguing that sales of bonds by employees of Charlotte, N.C.-based Bank of America helped trigger Parmalat’s collapse.
Both sides said the agreement cleared the way for future business between the companies. Shares of Parmalat resumed trading on the Italian stock exchange in October 2005.
Bank of America said Tuesday that the record of court rulings in the case “makes it clear that no one at Bank of America knew or could have known of the true financial condition of Parmalat. We have defended ourselves vigorously in these cases and are satisfied with this outcome today.”
Shares of Bank of America rose 25 cents, or about 1.9 percent, to $13.34.
In a December 2008 ruling, an Italian court in Milan concluded that Parmalat’s founder bore the brunt of the responsibility for the bankruptcy — a finding that disappointed defrauded bondholders who hoped to squeeze damages from Bank of America and other financial institutions that had sold them bad Parmalat bonds.
That court also convicted Calisto Tanzi of market-rigging and other charges, sentencing him to 10 years, but acquitted seven other remaining defendants in the trial. Among those acquitted were three former Bank of America employees.
Parmalat collapsed under crushing debt of $19.5 billion — eight times what it had disclosed to investors. Banks have claimed they were equally as duped as investors.
Tanzi blamed the banks for the labyrinth of shaky deals. Those transactions helped the once simple dairy business grow into a global empire with operations in more than 30 countries, but also led to its collapse. Tanzi has always denied having a secret account where the lost investments are stashed.
In December 2003, Parmalat acknowledged the $5 billion account with Bank of America did not exist. Shortly afterward, Parmalat filed for bankruptcy protection.