2 Former Parmalat Auditors Indicted

A judge ordered two former auditors at dairy giant Parmalat (search) to stand trial for false accounting and market rigging, handing down the first indictments in the massive fraud scandal that stripped many Italians of their savings.

At the closed-door hearing Tuesday, consumer groups also filed for compensation on behalf of thousands of small investors. The fast-track hearing in Milan marked the start of the legal process to assign blame for the demise of Parmalat, long held up as a standard of innovative, family-run Italian business before it crashed in December.

Judge Cesare Tacconi indicted Maurizio Bianchi and Lorenzo Penca, who both worked at auditing firm Grant Thornton's (search) former Italian office. They are set to stand trial at the end of January.

Penca, the former head of the company's Italian branch, and Bianchi, his partner, were arrested Dec. 31 and later released.

Prosecutors accuse them of having falsely certified Parmalat's balance sheets and of having proposed "fictitious operations" needed to carry out Parmalat's fraud.

Salvatore Stivala, a lawyer for the two men, said the decision came as no surprise because he had requested it himself. By opting for a fast-track trial to start in January, the two will have a chance to defend themselves sooner, he said.

Milan prosecutors have asked for trials for 27 others, ranging from the dairy giant's founder Calisto Tanzi (search) to former company financial officers and lawyers, and for three institutions: the Italian branches of Bank of America and auditor Deloitte & Touche SpA, and Grant Thornton's former Italian branch.

Alleged crimes include market rigging, providing false information to auditors and blocking the work of stock market regulator Consob. More hearings are scheduled in the coming weeks.

Consumer groups say up to 135,000 investors lost money in Parmalat's crash. Many are modest Italian savers who pin their hopes on the courts and on Enrico Bondi (search), the government-appointed turnaround expert trying to relaunch Parmalat.

Though some investors fear they have little chance of seeing compensation, one retired couple said they hope to recover most of their 78,000 euro ($96,000) investment in Parmalat.

"I hope that Bondi can help us," said Amalia Salario, who waited outside the courtroom with her husband Alfredo Pavese. "I beg him on my knees."

Tanzi and other former top officials at the company were not in court.

"If I met them I would spit in their faces ..." Salario said.

Tanzi was released from house arrest last week after spending months under arrest at home, in jail and at hospitals, where he was treated for a chronic heart problem.

The multinational company's acknowledgment in December that it didn't have nearly $5 billion it had claimed was in a Bank of America account stunned the business world. It was the first indication of the extent of the scandal, which the U.S. Securities and Exchange Commission (search) has called "one of the most brazen corporate frauds in history."

Shortly after the first revelations, Parmalat went into bankruptcy protection. An audit during the early days of the probe put the company's debt at $18 billion, eight times higher than the company claimed in its accounts.

The Milan prosecutors have focused on the role of banks and other financial institutions in the scandal. They are still investigating several banks who sold bonds for Parmalat in advance of the crash.

Meanwhile, prosecutors in Parma have been investigating Tanzi and other former top executives ober the bankruptcy filing. That probe is also still under way.

Lawyers say that by Italian standards, proceedings have so far been swift. However, they stressed that with investigations still continuing, it will be months before key questions in the case can be answered.

On Tuesday, the new Parmalat and the regulator Consob each filed to receive compensation alongside the small savers, said Parmalat's lawyer, Marco De Luca.

Bondi has also filed suits for billions of dollars against the banks Citigroup Inc., UBS, Deutsche Bank, Credit Suisse First Boston as well as Parmalat's former auditors.

The turnaround expert has said he believes the financial institutions abetted the company by disguising its true financial state, or received money from Parmalat at the expense of other creditors when there were clear indications its finances were worse than the company had stated.

He has also said investors could receive proceeds from the suits against the banks, and that those who lost savings would be given shares in a newly listed company.

International financial institutions have insisted they too were fooled by Parmalat's fraudulent bookkeeping.