Trial begins in Parmalat case vs Citigroup

By Martha Graybow

HACKENSACK, N.J. (Reuters) - Lawyers for Citigroup Inc (C.N) and Parmalat SpA (PLT.MI) made dueling accusations in front of a U.S. jury on Thursday about what led to the Italian food company's 2003 bankruptcy at the opening of a U.S. civil trial.

Citigroup is the first defendant to go to trial in the United States over accusations of helping conceal corrupt activity by former Parmalat insiders. Parmalat, which collapsed in December 2003 and emerged from bankruptcy in 2005, is seeking $2.2 billion in damages from the biggest U.S. bank.

Attorneys for Citigroup said the bank was a victim of Parmalat's fraud and is pursuing its own claims, saying it lost almost $700 million when Parmalat went bankrupt.

A lawyer for the revamped Italian food company told jurors that the bank ignored red flags at the company in a quest for high financial advisory fees and big bonuses for its bankers.

"This case is about the bank's full knowledge of how it was helping the Parmalat crooked insiders," said Kenneth Chiate, who represents Parmalat's new management, in his opening statement to jurors in a small, tightly packed courtroom.

He said that Citigroup lent money to Parmalat to help the company in covering up its losses and looting by ex-Parmalat insiders. The loans did not show up as debt on Parmalat's balance sheet, "so the world thought that they didn't have as much debt as it (Parmalat) did," he said.

Citigroup's actions were driven by its bankers' hopes of earning high fees, which translated into big bonuses for themselves, he said, citing one e-mail from a Citigroup employee congratulating his colleagues on one deal and the expected fees they were set to earn.

Later in the day, Citigroup lawyers offered their own version of events. Theodore Wells, a well-known U.S. Trial lawyer who had represented former George W. Bush administration official Lewis "Scooter" Libby in his criminal case, said Citigroup was a victim of Parmalat's fraud and that he will present witnesses who will testify that Parmalat made false statements to the bank.