Parmalat ruling leaves global networks exposed
Shareholders say global network should be held responsible for Deloitte Italy's Parmalat case
A US ruling that
Deloitte
could be liable for the actions of its Italian network over the
Parmalat fraud will
make global firms more vulnerable to future lawsuits.
The New York District Court last week dismissed an attempt by Deloitte to
have a class action thrown out.
Shareholders claim the global network should be held responsible for Deloitte
Italy’s alleged fraudulent activities as auditor of the collapsed Italian dairy
giant.
One legal expert said the US ruling might ‘act as a break’ to efforts by
leading firms to market themselves as global organisations and lead to a rise in
class actions.
Parmalat said: ‘Obviously we are disappointed in the judge’s decision but we
are confident of victory at any trial of this matter. As the court pointed out,
the evidence presented by the Deloitte defendents would support a jury verdict
in their favour.’
Parmalat collapsed in 2003 after reportedly understating its debt by nearly
$10bn and overstating its net assets by $16.4bn.
The plaintiffs, purchasers of Parmalat securities between January 5, 1999 and
December 18, 2003, are looking to hold the firm liable on a global basis, which
has lead to DTT efforts to distance itself from claims levelled at its Italian
member firm.
But Judge Lewis Kaplan ruled that Deloitte was not exempt from rules
governing a superior’s liability for the action of a subordinate, known as
vicarious liability. ‘The legislative history indicates no intent to alter
traditional principles of vicarious liability… The court thus concludes the
Deloitte defendants are not entitled to summary judgment on this claim,’ Kaplan
said.
Deloitte is headquartered in New York but it also set up in Switzerland as an
association – or ‘verein’.
Deloitte claims this is a separate legal entity, which only provides an
umbrella for its global network.