US banks Citigroup and Morgan Stanley, Swiss UBS and German Deutsche Bank are facing trial over the Parmalat case, Europe's biggest-ever financial scandal.
Parmalat is frequently referred to as 'Europe's Enron'. It came to light in 2003, when it emerged that the company had falsified its accounts, hiding some €14 billion debts.
Ordered on 13 June 2007 by a Milan judge to stand trial, the banks face a €300 million damages claim and a trading ban in Italy. Thirteen of the banks' employees face up to five years in jail for having made false financial statements.
Italian prosecutors argue that bankers helped Parmalat to establish false accounts through fictitious contracts to sell nonexistent products, which turned a loss into a profit, whereas in fact the company had been in serious financial difficulty for years. The banks deny all charges.
For the company's around 40,000 bondholders seeking compensation and damages since the collapse of Parmalat, the trial annoncement is good news, as, according to the lawyer representing the bondholders: "Banks can pay."
The trial is set to begin in January 2008 in Milan.
The Parmalat scandal highlighted major shortfalls in European corporate ethics. The EU has since stepped up the implementation of an Action Plan, published in May 2003 as Europe's response to the Enron case, aiming to modernise company law and enhance corporate governance in the EU.
