Morgan Stanley has agreed to pay $188.9 million to Parmalat Finanziaria SpA, becoming the first international financial-services company to settle legal problems stemming from the bankrupt dairy group’s accounting scandal, says Reuters.
According to reports, the agreement in principle “settles all existing and potential actions and claims, including compensation of damages,” that Morgan Stanley knew Parmalat was failing when it helped the company raise capital. In June 2003, the bank arranged a $362 million bond issue for Parmalat; the Italian company’s massive fraud was uncovered just six months later.
Parmalat sued Morgan Stanley in February of this year. The investment bank spent $140 million on legal matters in the second quarter, mostly on settlement negotiations with Parmalat, according to the Associated Press, citing the company’s recently released financial report. “Morgan Stanley continues to believe that the firm and its employees’ conduct was proper, and this settlement does not constitute any admission of liability,” Carlos Melville, a bank spokesman, told the wire service.
The agreement must still be approved by Italian regulators and by Enrico Bondi, Parmalat’s state-appointed administrator.
Last summer, in Bondi’s first legal action, Parmalat sued Citigroup for $10 billion. The Italian bank has since sued Bank of America, Deloitte & Touche, and Grant Thornton, as well as a host of other financial institutions; all have denied wrongdoing.