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Financial Scandals and the Role of Private Enforcement: The Parmalat Case


Guido A. Ferrarini


University of Genoa - Law School; European Corporate Governance Institute (ECGI)

Paolo Giudici


Free University of Bozen, Bolzano - School of Economics and Management; European Corporate Governance Institute (ECGI)

May 2005

ECGI - Law Working Paper No. 40/2005

Abstract:     
Coming shortly after the Enron and WordCom scams, the Parmalat scandal offers a good opportunity to compare failures on both sides of the Atlantic. In this paper, we start by tracing Parmalat's history and describe the frauds and the criminal proceedings and civil actions that followed the company's collapse both in Italy and the US. We then focus on Parmalat's governance and gatekeepers, and argue that gatekeepers are substantially undeterred in Italy because of poor enforcement rather than legislative black holes. In fact, law on books, in particular the civil law concerning auditors, is even more severe than common law. We subsequently analyse the causes of under-enforcement and the reasons why Parmalat generated litigation in the US rather than Italy. Drawing from economic analysis, we explain the role of private enforcement and consider the benefits of class actions. In this respect, we emphasize the importance of discovery and pleading rules. We also find that the interplay between public and private enforcement is missing in Italy and argue, by way of conclusion, that US securities regulation was transplanted into Continental Europe without sufficient modernisation as to civil procedure in the area of mass claims and complex litigation.

Number of Pages in PDF File: 62

Keywords: corporate fraud, corporate scandals, Enron, Parmalat, directors, board of

JEL Classification: K22, K23, K41, K42

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Date posted: May 27, 2005  

Suggested Citation

Ferrarini, Guido A. and Giudici, Paolo, Financial Scandals and the Role of Private Enforcement: The Parmalat Case (May 2005). ECGI - Law Working Paper No. 40/2005. Available at SSRN: http://ssrn.com/abstract=730403 or http://dx.doi.org/10.2139/ssrn.730403

Contact Information

Guido A. Ferrarini
University of Genoa - Law School ( email )
Via Balbi, 22
16126 Genova
Italy
+39 010 209 9894 (Phone)
+39 010 209 9890 (Fax)
HOME PAGE: http://www.clfge.org
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Paolo Giudici (Contact Author)
Free University of Bozen, Bolzano - School of Economics and Management ( email )
Via Sernesi/Sernesistraße 1
39100 Bozen-Bolzano (BZ)
Italy
+39 0471 013140 (Phone)
+39 0471 013009 (Fax)
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org/members_directory/member.php?member_id=120
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