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September 24, 2009

US court dismisses Parmalat cl

By Nicholas Moody

A New York District Court judge has dismissed claims against Grant Thornton International and its US subsidiary that arose following the collapse of Italian dairy company Parmalat.

Judge Lewis Kaplan dismissed the claims against the network and its member firm, and a third against Bank of America, noting in his 45-page judgement that Parmalat and Parmalat Capital officers had been acting within the scope of their employment when they engaged in a massive fraud that ended in the collapse of the company.

“Plantiffs simply can not get around the fact that Parmalat, by means of the transactions complained of, raised and spent millions of euros for corporate purposes. The actions of its agents in so doing were in furtherance of the company’s interests even if some of the agents intended at the time they assisted in raising the money to steal some of it from the company,” Kaplan wrote.

Kaplan also dismissed separate lawsuits by Parmalat subsidiary Parmalat Capital Finance Ltd against Bank of America and both Grant Thornton entities.

The decision has been closely monitored by the accounting profession as courts attempt to establish the legal line of control between ‘umbrella’ network administration bodies and member firms.

Grant Thornton International was dragged into the suit due to the fact its former member, Italaudit, served as Parmalat’s principal external auditor between 1995 and 1999.

The Italian dairy company collapsed in 2003 following the discovery of one of Europe’s largest frauds. It involved the understatement of Parmalat’s debts by nearly $10 billion and the overstatement of net assets by $16.4 billion.

Spokespeople for Grant Thornton International and Grant Thornton US said they were very pleased with the decision and that throughout the case they remained confident of their position.

In July, a Miami court judge cleared BDO International of responsibility for $352 million in punitive damages and $170 million in compensatory damages awarded against its US member firm BDO Seidman.

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