NEW YORK - Citigroup said Thursday it filed suit in a US court against bankrupt Italian food giant Parmalat, alleging the bank should be compensated as a victim of the massive European finance scandal.
Citigroup, the world's biggest financial group, said it filed the action in New Jersey State Court in response to an August 2004 suit brought by the extraordinary commissioner of Parmalat, Enrico Bondi.
"Citigroup is a victim of Parmalat's fraud and has lost more than 500 million euros (670 million dollars) as a result," said William Mills, chief executive of Citigroup's corporate and investment bank in Europe, Middle East, and Africa.
Parmalat last year sued Citigroup, alleging the bank knew Parmalat was double-billing as much as 340 million dollars in receivables that the bank used as backing for securities.
But Citigroup's countersuit accuses Parmalat of "fraud, negligent misrepresentation," and the violation of agreements of the failed bond arrangement.
The Citigroup complaint alleges that Parmalat deceived bankers by, among other things, "inventing assets in a fictitious Cayman Islands hedge fund," and by "forging documents to make it appear that Parmalat had 4.9 billion dollars in a Bank of America account."
"Citigroup had nothing to do with these frauds and was not aware of them," Mills said.
The Citigroup suit also claims Parmalat "repeatedly lied about its true financial condition in its financial statements, in press and other public statements, and to regulators and ratings agencies," a statement from the bank said.
"Citigroup only did business with Parmalat because it relied on the statements Parmalat had made about its financial condition and on its globally recognized status as a reputable, investment-grade listed multi-national."
"If Citigroup had known the truth, it would not have done business with Parmalat," Mills said.
The group collapsed after about 14 billion euros was found missing from its accounts, sparking one of Europe's biggest financial scandals ever. Some 135,000 people were victims of the group's debacle.
Bondi alleges that the banks had known for a long time that Parmalat was in serious trouble but had glossed over this in order to protect their financial interests.
03/17/2005 21:54 GMT