Witnesses: Parmalat Falsified Invoices

Parmalat qualified for about $5 billion in bank loans by double billing for some products, according to court documents and people familiar with the company’s financing.

The Italian food giant issued duplicate invoices for products sent to at least 33 distributors and hundreds of supermarkets and used the extra invoices to gain credit from about 40 Italian banks, according to transcripts of testimony given to prosecutors probing the insolvent maker of long-life milk, Archway cookies and Kyr yogurt.

Parmalat also obtained $348 million of funding from Citigroup backed by supermarket billings, according to testimony by Marco Ghiringhelli, an auditor for PricewaterhouseCoopers.

A Citigroup finance unit sold securities backed by the billings. “Parmalat artificially created receivables which gave it access to bank financing that it otherwise would have difficulty obtaining,” Ghiringhelli said, according to a transcript of his testimony.

Claudio Pessina, one of Parmalat’s internal accountants, told investigators that Citigroup employees knew about the double-billing system as early as 1995, according to a transcript of Pessina’s interrogation.

Citigroup denied the it knew of the double billing.

“Citigroup arranged the securitization based on what it understood were legitimate invoices,” said Susan Tether, a spokeswoman based in London. “It is absurd to suggest that Citigroup was aware that false invoices were involved and yet continued to arrange financing.”

Parmalat was declared insolvent Dec. 27 after disclosing that a $4.9-billion bank account didn’t exist. The company’s debt reached $18 billion at the end of September, about eight times the amount originally reported, Parmalat said a week ago.

Parmalat’s founder, Calisto Tanzi, and Fausto Tonna, the company’s former chief financial officer, are among 11 people who have been arrested as magistrates in Parma, Italy, and Milan investigate the bankruptcy.