December 20, 2010 12:25 PM
Name Partner at Elite Italian Firm Gets Suspended Sentence in Parmalat Trial
Posted by Julie Triedman
In a story shaking up the legal community in Italy this past week, on December 9, Sergio Erede, a cofounder of top-tier Italian firm Bonelli Erede Pappalardo, was handed a year-and-a-half suspended jail sentence in connection to the 2003 collapse of Italy's Parmalat S.p.A. Erede is perennially one of Italy's highest-earning corporate lawyers.
The Court of Parma has not yet issued the actual counts that Erede was convicted on. But lawyers at U.S. firms in Italy say the 70-year-old lawyer was convicted of negligence. The charges stemmed from Erede's former position as a board member of Parmalat, not from his legal practice.
Erede and several individuals--including former Parmalat board members and executives, among them Parmalat founder Calisto Tanzi--were sentenced by the court, located in the northern Italian city of Parma, in the Emilia-Romagna region. Tanzi was convicted of fraudulent bankruptcy and criminal conspiracy, according to the Italian press, and sentenced to 18 years in prison.
The sentences in one of the highest-profile white-collar criminal cases in Italy in recent years come in the midst of stepped-up enforcement of financial laws nationally. In August, we reported on a number of other criminal cases against international companies and their executives that are currently in the pipeline.
Erede's sentence was the lightest among the group of directors charged. The other lawyer charged, Paolo Sciume, a prominent Milan-based attorney who also sat on Parmalat's board, reportedly was convicted on counts of bankruptcy, fraud, and conspiracy. He received a sentence of five years and four months, according to Il Sole.
Parmalat collapsed in 2003 under the weight of $18 billion in debt; it was Europe's largest bankruptcy at the time. The collapse has spawned a half-decade of civil and criminal litigation in Italy and the U.S.
The managing partner of Bonelli Erede Pappalardo, Alberto Saravalle, told The Lawyer that "in relation to Mr. Erede’s role at the firm, it is business as usual." Erede is appealing the verdict to the court of appeals in Bologna, according to that story.
Still, the high-profile conviction of Erede, a major rainmaker, can't be helpful to the firm, even if vacated on appeal. It remains to be seen how the conviction will affect the firm's relationship with Magic Circle firm Slaughter and May, with which it has a "best friends" relationship. It has regularly worked with Cravath, Swaine & Moore; Sullivan & Cromwell; and other Wall Street firms. The firm employs more than 300 lawyers and has offices in Milan, Genoa, Rome, Brussels, and London.
Italian corporate firms, including Bonelli Erede, have had a challenging year. In the first three quarters of 2010, the Italian M&A market shrank 46 percent, according to Thomson Reuters league tables. The firm ranked at the top of the league tables in Italian M&A for both volume and value, as it has in previous years. The firm has some of the leading practices nationally for banking and finance, capital markets, M&A, and dispute resolution, among other areas.
Erede, 70, received an LLM from Harvard Law School in 1964 and was an associate at Sullivan & Cromwell and Hale and Dorr, a predecessor firm of Wilmer, in the early 60s. In addition to his work as an attorney, in recent years he has been on the board of several Italian publicly listed companies, including Luxottica Group S.p.A. and Interpump S.p.A.. In 2009 Erede was the chairman of the board of AON Italita S.p.A. and vice-chairman of the board of Banca Nazionale del Lavoro S.p.A.
In addition to the jail time, the court also ordered the defendants to collectively pay two billion euros in damages. "Erede has a lot of money," says one corporate lawyer with a U.S. firm in Milan, adding, "so one can expect that prosecutors will try to enforce the award, certainly against Erede." Erede, this lawyer says, is widely reported to pull in 10 million euros a year to his firm. What is also unclear is whether Erede will be forced to relinquish his many board posts. Under Italian law, those convicted of financial crimes may be prohibited from sitting on the boards of public companies.
Erede led one of Italy's premier national firms, Erede & Associati, until 1999, when it merged with two other top Italian firms, Bonelli & Associati and Pappalardo & Associati, to form the current corporate and litigation powerhouse. He remains one of the leading business-getters in the firm.
According to the leading Italian newspaper, Corriere della Serra, prosecutors began their criminal investigation in 2004, a year after the company's collapse. The Parma prosecutors focused on bankruptcy fraud; the Milan prosecutors focused on bid rigging and fraudulent financial reporting.
The response by the Italian legal community has been muted, notes the Italian lawyer. But "if I were a client, would I be happy to instruct Bonelli Erede?"
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