Parmalat Violations of Sarbanes-Oxley Act
Violations of Sarbanes-Oxley Act Parmalat is a European company, and it’s headquarter is in Italy. The US Security and Exchange Commission still targeted Parmalat with fraud charge after the Parmalat fraud was revealed on Dec, 2003 (Kapner, D.W., 2003). The US SEC caught the chance to practice its law in a long range when Parmalat sponsored a program called American Depositary Receipts in the US to raise money since August 1996. The SEC stated that Parmalat sold their bonds to American investors while presenting untrue financial statements. The SEC also claimed that American investors had been cheated by Parmalat and purchased Parmalat’s note and bond totaling in dollar value of 1.5 billion by the time Parmalat was bankrupted. The SEC said that the ADR program was also affected by Parmalat’s misleading data, and the SEC has the right to protect American investors’ interest. This explains how the SEC is involved in the case of Parmalat fraud. The Sarbanes-Oxley Act of 2002 was the legal weapon used by the SEC to charge against Parmalat. There are many scenarios within the Parmalat case that violates the Sarbanes-Oxley Act. The following section will explain in detail how Parmalat violates the Sarbanes-Oxley Act.
Violation One The former CEO and founder, Calisto Tanzi, admitted that he and the top managers forged and cooked Parmalat’s account for over a decade (Galloni, Reilly, & Reilly, 2003). The CEO and their top managers who are the relatives of the CEO decided to start some special purpose entities to cover the debt and lose of Parmalat. Those SPEs covers billions debt for a decade long and was not covered by auditors. Parmalat offered falsified financial statement for the public investors. All these actions were trying to mislead that Parmalat was making profit so the price of stock won’t fall. Parmalat was also issuing debt during the years when it was actually losing money. This action violated the following section of Sarbanes-Oxley Act:
Violation One The former CEO and founder, Calisto Tanzi, admitted that he and the top managers forged and cooked Parmalat’s account for over a decade (Galloni, Reilly, & Reilly, 2003). The CEO and their top managers who are the relatives of the CEO decided to start some special purpose entities to cover the debt and lose of Parmalat. Those SPEs covers billions debt for a decade long and was not covered by auditors. Parmalat offered falsified financial statement for the public investors. All these actions were trying to mislead that Parmalat was making profit so the price of stock won’t fall. Parmalat was also issuing debt during the years when it was actually losing money. This action violated the following section of Sarbanes-Oxley Act:
References: Alessandra Galloni in Milan, Carrick Mollenkamp in Atlanta and Darren McDermott in, Hong Kong. (2003, Dec 29). A global journal report: Scandal at parmalat broadens; staff may have destroyed files. Wall Street Journal Retrieved from http://search.proquest.com/docview/398854445?accountid=7084 Alessandra Galloni in Milan, David Reilly in London and Michael Schroeder,in Washington. (2003, Dec 30). Leading the news: Parmalat founder admits involvement in fraud; SEC sues dairy company over $1.5 billion debt offer and an attempted buyout. Wall Street Journal Retrieved from http://search.proquest.com/docview/398956062?accountid=7084 Brooks and Dunn. (2012). Business and Professional Ethics for Directors, Executives and Accountants, 6th edition. South-western Cengage Learning. David McHugh. “Parmalat’s scandal not very clever.” Seattle Times, January 20, 2004, http://seattletimes.nwsource.com/html/businesstechnology/2001839930_parmalat200.html (accessed November 16, 2005). F. Kapner. “Parmalat’s Account 999 Points a Finger at Deloitte,” Financial Post, April 12, 2004, FP16. Fred Kapner and, D. W. (2003, Dec 31). SEC targets italian food giant with fraudcharges: Regulator says parmalat debt sales hinged on false data, by david wells andFred kapner. Financial Times Retrieved from http://search.proquest.com/docview/249516571?accountid=7084 Navigant Consulting, Canadian Institute of Chartered Accountants, and the American Institute of Certified Public Accountants, “Milk Gone Bad,” Report on Fraud 6, no. 5, 6, March 2004.