Italy: Parmalat scandal throws workers into survival struggle

Workers at the main production base in Italy of “Europe’s Enron” have no sympathy for those they call the “magnificent eight” now locked up in Milan’s notorious San Vittore prison.

Among them are the founder and Chief Executive of the Italian food giant Parmalat, Calisto Tanzi, and five other directors – past and present. Also locked up and being regularly ‘interviewed’ are two heads of the company’s accounting firm, Grant Thornton. The fraudulent activities of this gang and no doubt a few more ‘associates’ have brought the company to bankruptcy and to the verge of collapse.

As the drama unfolds, the Chairman of Parmalat’s Venezuelan arm and head of the company’s bogus offshore unit has promised to give up and not go into hiding (saying "I am no Bin Laden"!). Outside the Parma prosecutor’s office in Parma on Monday (5 January) one of the Chief suspects, ex-finance director Fausto Tonna, rounded on journalists shouting in true Mafia style: "I wish you and your families a slow and painful death"!

As the hunt widens to uncover the extensive network behind the disappearance of $10 billion into a "black hole", the jobs of more than 36,000 workers in 139 workplaces worldwide are under threat. (The missing billions are equivalent to nearly 1% of Italy’s GDP!)


The company has grown in 40 years from a small family-run delicatessen in the northern city of Parma to the eighth largest company in Italy and a ‘flagship’ of Italian capitalism. It now operates in 30 countries packaging and selling milk, water, fruit juice, biscuits and other foods and has made rapid inroads into the Latin American and East European markets. Its base is still in Parma, the original home of prosciuto ham and parmesan cheese and known as the "food capital" of the Italy. Ironically, after a tussle between the Berlusconi government and the European Union, Parma has recently been selected to become home to the EU’s food control establishment.

But the city is also at the centre of Italy’s "red belt" with a long history of militant workers’ struggle. A shop steward of the union federation Cisl, Angelo Peracchi, explained after a shop-floor council meeting on New Year’s Eve, that the workforce is determined to fight. "There are whole families working here…many fear they have lost their life savings because the company and the local banks encouraged them to invest in Parmalat bonds…The workforce here is very heavily unionised". There is no detail yet as to what action is planned, except a civil suit against the management for damages. Consumers and small investors are organising demonstrations to besiege the Prime Minister’s office and the Bank of Italy on 21 January. But far more than this will be needed. The workers and their organisations should campaign around the demand for immediate nationalisation (without compensation) of Parmalat and a programme of industrial action on an international as well as a local plane.

Government beleaguered

The workers of Italy are still involved in numerous strikes, and a generalised offensive against the government is needed. The economy is in trouble even without the Parmalat crisis and wages are not keeping pace with inflation. Six million Italian pay packets are below the minimum subsistence level. The budget deficit is €12bn worse than last year and only kept within the 3% of GDP deficit range by the sale of state assets and ‘one-off’ measures which cannot be repeated. The government of Silvio Berlusconi itself is threatening to collapse as the coalition partners fall out. The Parmalat crisis could be the last straw.

Parts of the Italian ruling class who have resented the way the adventurer, Berlusconi, has taken hold of the machinery of government, and may well use this crisis as a pretext to move against him. He himself was an unknown swash-buckling ‘entrepreneur’ and is now the richest man in Italy with little regard for transparency or accountability. But he is bound to be worried about his future prospects. He hopes to deflect the criticisms that it was the softening of Italian law in relation to false accounting, under his insistence and for his own protection that has encouraged Tanzi and his accomplices to carry out their gigantic fraud.

Flying in the face of ‘free enterprise’ policies and appealing to the European Commission to waive the rules on state aid and intervention, Berlusconi’s government has taken Parmalat into administration and appointed Enrico Bondi, "a turn-around expert", to replace the imprisoned executives. Not only are the 4,000 jobs at Parmalat at stake, but the livelihoods of at least 5,000 dairy farmers in Italy. The government has organised two cash injections already – one of €25m and another of €50 million, possibly reaching €100m. It has given a six month period of respite for a recovery to take place.

Bondi has refused an offer by Tanzi to make all his personal assets available, saying (correctly) they will not solve the problem of the missing billions or the €13bn company debt. Tanzi himself has admitted salting away €500 million into his own coffers and those of his family-owned tour company, Parmatour.

The Berlusconi government is at present trying to introduce a new system of financial regulation and supervision which would mean taking it into its own hands and away from the Bank of Italy. Such a measure is unlikely to have made any difference to the worldwide corporate robbery, hatched in and directed from Parma.

As a member of Lotta per il socialismo (CWI) in neighbouring Modena comments, it is not just a question of regulation and control in the way the economics minister, Tremonti, tries to explain it. "Instead it is capitalism itself which is to blame because it is a system based on the laws of profit and not the needs of people like the striking underpaid transport workers, the Alitalia hostesses, fighting for a better deal in life or the milk-workers of Parmalat and all their dependents."

Wider repercussions

The Securities and Exchange Commission (SEC) in New York calls the Parmalat affair, "One of the largest and most brazen corporate financial frauds in history. The SEC has launched its own investigation into how the company executives forged a letter supposedly from the Bank of America claiming there was $4bn in a Cayman Islands account. There are also investigations into the non-existent sale of powdered milk worth $620m to Cuba and into why many ‘respectable’ banks and accounting companies were talking up the prospects of Parmalat, instead of warning of problems that actually began as far back as the late ‘80s. The names cropping up in extensive inquiries about bond and derivative sales include Barclays, Deutsche Bank, Chase Manhattan-JPMorgan, Merrill Lynch and another world class accounting firm, Deloitte Touche,. An article in Liberazione (the paper of Rifondazione Comunista) goes into the details under the heading: "How the bankers came to the aid of the milkman".

There have been other dramatic scandals or near collapses elsewhere in Europe in the recent period (Vivendi in France, Scania in Sweden and Ahold in the Netherlands). Italian capitalism’s No.1 conglomerate, Fiat, has also been fighting for its life in the recent period, milked for its profits over the decades by one wealthy (Agnelli) dynasty. Compared with Enron, the sums involved in Parmalat are more than ten times smaller but, as scores of investigators continue their work, La Repubblica newspaper comments on 5 January: "The work in progress on the Parma-Milan-New York axis risks touching the very heart of the international finance system".

Instead of reining in its activities, Parmalat’s boss threw more and more money around. He bought football clubs in Russia, Mexico and Brazil and even started negotiations to acquire the Bank of Nicaragua, three years ago just before it filed for bankruptcy. The Tanzi family firm of Parmalat also owns the Italian Serie A team, Parma and its fate also now hangs in the balance. An article in the daily, Il Manifesto, is entitled ‘Parma dreams Abramovitch’. The fans are reported to be dreaming of their team being saved by the Russian oligarch, Abramovitch who bought Chelsea last year.

But for the workers of Parmalat and of all the associated industries, in Italy and world-wide, the only solution is a struggle to oust all oligarchs and family bosses from their ‘enterprises’ and from society as a whole.

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January 2004