Deloitte on Friday reached an accord with Parmalat, agreeing to pay $149m (€115m) to settle allegations that the audit firm helped to prolong fraud at the Italian dairy company prior to its collapse at the end of 2003.
Deloitte has not admitted wrongdoing and it has the option to cancel the agreement for $15m if some final legal hurdles are not cleared. However, if the payment goes through it will bring to about €600m the amount that the new management at Parmalat has so far recovered from the dozens of lawsuits it has filed against auditors and financial institutions.
Parmalat, which has relisted on the Milan stock exchange, is still seeking several billion euros in restitution. Enrico Bondi, chief executive, contends that the previous regime at the company was able to continue its fraudulent activity in part because auditors and banks knew or should have known that something was wrong but failed to act.
The money recovered from Deloitte is small compared with the amounts that Parmalat is seeking from large banking groups such as Bank of America and Citigroup.
However, audit firms have limited resources and have rarely settled lawsuits for more than $200m.
Investors’ belief that Parmalat will recover money from its lawsuits has driven up Parmalat’s share price and significantly boosted its assets. The shares are likely to increase in value again on Monday.
Parmalat was suing Deloitte along with Grant Thornton, another auditor, and Bank of America, in court in New York.
The judge presiding over the case recently ordered all the parties to explore a settlement, a move that people close to the talks said was in part prompted by news that Deloitte was moving closer to settling.
Deloitte started to push hard for a settlement at the end of last year. It said some time ago that a settlement might be preferable to the continued costs of litigation.
However, attempts to find a quick settlement with all the groups involved failed and lawyers for Grant Thornton, Bank of America and Parmalat have resumed their preparations for a trial. Deloitte and Parmalat said on Friday in a joint statement: “The settlement follows years of investigation by Parmalat and extensive civil discovery by the parties in connection with actions pending in the United States and was facilitated by various judicial and regulatory authorities.”
Former investors in the dairy company are still targeting Deloitte, Grant Thornton and a number of banks.
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