In re Parmalat Securities Litigation
| Decision Date | 18 July 2005 |
| Docket Number | No. 04 Civ. 9771(LAK).,No. 04 MD 1653(LAK).,04 MD 1653(LAK).,04 Civ. 9771(LAK). |
| Citation | 377 F.Supp.2d 390 |
| Parties | In re PARMALAT SECURITIES LITIGATION. Dr. Enrico Bondi, Plaintiff, v. Grant Thornton International, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
John B. Quinn, Loren Kieve, Michael B. Carlinsky, R. Brian Timmons, Terry L. Wit, Quinn Emanuel Urquhart Oliver & Hedges, LLP, for Plaintiff.
Brian M. Cogan, James L. Bernard, Quinlan D. Murphy, Stroock & Stroock & Lavan LLP, for Defendant Grant Thornton International.
Bruce R. Braun, Linda T. Coberly, Theodore Z. Polley III, Winston & Strawn LLP, for Defendant Grant Thornton LLP.
Miles N. Ruthberg, Peter W. Devereaux, Janet Malloy Link, Latham & Watkins, LLP, for Defendant Deloitte Touche Tohmatsu.
Alan N. Salpeter, Stephen M. Shapiro, Michele Odorizzi, Daniel L. Ring, Robert J. Ward, Mayer, Brown, Rowe & Mawe LLP, for Defendants Deloitte & Touche USA LLP and Deloitte & Touche LLP.
Richard A. Martin, Kevin J. Toner, Mark Picard, Patryk J. Chudy, Heller Ehrman White & McAuliffe LLP, for Defendant Deloitte & Touche S.p.A.
In December 2003, the Parmalat dairy conglomerate collapsed in scandal.1 Dr. Enrico Bondi, the Extraordinary Commissioner of Parmalat Finanziaria, S.p.A., Parmalat S.p.A. and its affiliates in Extraordinary Administration in Italy (collectively "Parmalat"), brings this action against Parmalat's former auditors and their affiliates on the grounds of professional malpractice, fraud, aiding and abetting fraud and constructive fraud, negligent misrepresentation, aiding and abetting breach of fiduciary duty, theft and diversion of corporate assets, conversion, aiding and abetting fraudulent transfer, deepening insolvency, and unlawful civil conspiracy. Defendants move to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). These motions raise issues similar to those resolved in a prior opinion in the related securities action.2
The complaint alleges the following facts, which the Court assumes to be true for purposes of this motion.
Plaintiff Dr. Bondi has been appointed by the Italian government as the Extraordinary Commissioner of Parmalat, a position he contends is similar to that of a bankruptcy trustee in the United States.3 He brings this action on behalf of Parmalat against its former auditors Grant Thornton S.p.A. ("GT-Italy"), now known as Italaudit, S.p.A., and Deloitte & Touche S.p.A. ("Deloitte Italy") and their respective affiliates Grant Thornton International ("GTI") and Grant Thornton LLP ("GT-USA"), and Deloitte Touche Tohmatsu ("DTT") and Deloitte & Touche USA LLP and Deloitte & Touche LLP (collectively "Deloitte USA").4
DTT is a Swiss verein,5 headquartered in New York and the umbrella firm for the international accounting enterprise commonly known as "Deloitte."6 DTT claims that a Swiss verein is similar to an incorporated membership association and is legally distinct from its members.7 Deloitte USA is Deloitte & Touche LLP and Deloitte & Touche USA LLP, both of which are Delaware limited liability partnerships and together comprise the United States member firm of the Deloitte organization. Deloitte Italy is a societá per azione, an Italian limited liability entity, and the Italian member firm of DTT. Plaintiff alleges that Deloitte Italy partners Adolfo Mamoli and Guiseppe Rovelli, who served as lead partners on the Parmalat audit, "were Deloitte's contact persons in Italy"8 and that they held positions with specialized groups of DTT.9
According to plaintiff, Deloitte firms hold themselves out as an integrated worldwide accounting organization with DTT at the helm of "a global strategy executed locally in nearly 150 countries."10 The Deloitte firms report revenue on a combined basis11 and have a centralized decision making process.12 DTT creates professional standards to which member firms must adhere and oversees that adherence to ensure that "clients receive `uniform, quality service wherever they do business, anywhere in the world.'"13 It enforces compliance also with a global ethics program, the violation of which subjects a member firm or partner to expulsion.14
Plaintiff asserts that Deloitte operated as a unified accounting firm in respect of the Parmalat audit with 32 member firms or offices joining together to audit Parmalat and its subsidiaries. DTT, Deloitte Italy and the member firms shared in the compensation received for the Parmalat audit and each contributed funds and/or resources to that project.15
GTI is an Illinois nonprofit corporation headquartered in London that serves as the umbrella organization for the Grant Thornton firms providing accounting services to mid-size companies.16 GT-USA is an Illinois limited liability partnership and the United States member firm of GTI.17 Prior to January 2004, GT-Italy, a societá per azione, was the Italian member firm of Grant Thornton.18
Plaintiff alleges that GTI and its member firms hold themselves out as a unified accounting organization with offices in 100 countries.19 Member firms are required to adhere to certain standards and to comply with Grant Thornton procedures.20 GTI performs a regular review of its member firms and requires that they use the Grant Thornton logo and name when bidding for and providing services.21 Members firms cooperate on certain engagements, plaintiff alleges, and individual partners of these firms attend meetings together and participate in global practice groups.22
Beginning in the mid-1990s, Parmalat faced mounting losses from its operations in South America and elsewhere.23 To hide these losses, as well as the personal diversion of funds by Parmalat's founder and chief executive Calisto Tanzi,24 insiders at Parmalat, including Tanzi, chief financial officer Fausto Tonna, and its auditors, Lorenzo Penca and Maurizio Bianchi from GT-Italy, devised a scheme to use offshore companies to offload debt and manufacture the appearance of revenue.25
Initially, the scheme involved three shell companies incorporated in the Cayman Islands and Netherlands Antilles that were used to remove debt from Parmalat's balance sheet.26 In 1998, Parmalat insiders and its auditors at Grant Thornton incorporated Bonlat Financing, Ltd. ("Bonlat"), a Cayman Islands company that became the principal vehicle for the fraud.27 Bonlat then served as a dumping ground for Parmalat liabilities, all the while booking fictitious sales and revenue.28
One of the more notable fictitious transactions involved the "sale" of 300,000 tons of powdered milk to a Cuban state importer for $620 million.29 Bonlat purportedly sold the milk through Camfield Pte. Ltd. ("Camfield"), a Singapore based company with the...
To continue reading
Request your trial
-
In re Total Containment, Inc.
... ... 1683, 40 L.Ed.2d 90 (1974) ... In re Burlington Coat Factory Securities Litigation, 114 F.3d 1410, 1420 (3d Cir.1997) ... In determining whether the ... , a district court judge reached a similar conclusion concerning Illinois state law, In re Parmalat Securities Litigation, 377 F.Supp.2d 390, 416-17 (S.D.N.Y.2005), and did so by following a ruling ... ...
-
MPM Silicones, LLC v. Union Carbide Corp.
... ... 19 (E.D.N.Y. Nov. 26, 2012); Bondi v. Grant Thornton Int'l (In re Parmalat Sec. Litig.), 377 F.Supp.2d 390, 415 (S.D.N.Y.2005). In its February Order, the Court directed ... under 107(a) is itself sued by the government under 107(a) during the pendency of that litigation. Id. at 3. Notwithstanding that the law may be unclear, 13 Plaintiff's concerns are speculative ... ...
-
In re Felt Mfg. Co., Inc.
...pursue the interests of the bankruptcy estate and derivatively the interests of its creditors. Bondi v. Grant Thornton Int'l (In re Parmalat Sec. Litig.), 377 F.Supp.2d 390, 420 (S.D.N.Y.2005); Gheewalla, ___ A.2d at ___, 2007 WL 1453705, at *7. Indeed, where the injury from an alleged brea......
- In re Parmalat Securities Litigation
-
Chapter 10
...because the "materialization of the risk" takes the place of the corrective disclosure. See In re Parmalat Securities Litigation, 377 F. Supp. 2d 390 (S.D.N.Y. 2005), in which disclosure of a bond default was held to be the materialization of the alleged fraudulent scheme. See also In re Sc......
-
CHAPTER 3 interplay between Breach of Fiduciary Duties and Deepening insolvency Liability
...based on lender's influence over debtor to increase its debt).[88] Bondi v. Grant Thorton Int'l (In re Parmalat Sec. Litig.), 377 F. Supp. 2d 390, 419 (S.D.N.Y. 2005) (citations and footnotes omitted).[89] See, e.g., Official Comm. of Unsecured Creditors v. Foss (In re Felt Mfg. Co. Inc.), ......
-
CHAPTER 6 Summary of Positions on Deepening insolvency by State
...v. Arthur Andersen & Co., 571 N.E.2d 777, 782 (Ill. App. 1991).[269] Bondi v. Grant Thornton Int'l (In re Parmalat Sec. Litig.), 377 F. Supp. 2d 390, 418 (S.D.N.Y. 2005).[270] Harmelin v. Man Fin. Inc., 2007 U.S. Dist. LEXIS 73851, at *17 (E.D. Pa. Oct. 17, 2007).[271] Kirschner v. Grant Th......
-
CHAPTER 13 A SELECTION OF ETHICS ISSUES IN BANKRUPTCY CASES1
...Lipshaw, Law as Rationalization: Getting Beyond Reason to Business Ethics, 37 U. Tol. L. Rev. 959, 1016 (2006)). [20] Id. at 909. [21] 377 F.Supp2d 390 (S.D.N.Y. 2005). [22] Id. at 419. [23] See, e.g., In re Aston-Nevada Limited Partnership, 391 B.R. 84 (Bankr. D. Nev. 2006). Whether an org......