What went wrong? What now?

A judge yesterday began preliminary hearings into the €14-billion collapse of Parmalat that could lead to one of the biggest trials in Italian corporate history involving the dairy group's former executives, bankers and auditors.

Ten months after Parmalat plunged into insolvency, Judge Cesare Tacconi started the closed-door hearings as to whether to order 32 accused to stand trial for financial crimes including market-rigging.

Dozens of investors flocked to Milan's main court to register as civil plaintiffs in the fraud case, a reminder of the shock waves that Parmalat sent through global markets when if collapsed late last year.

Following is a summary of facts about the company and the legal case.

What is Parmalat?
One of Italy's best-known global brands, the multinational dairy group traces its roots back to a food shop in the northern Italian city of Parma which Parmalat founder Calisto Tanzi inherited from his father.

Mr Tanzi opened his first milk plant in 1961 and then used ultra heat technology to bring long-life milk to the market.

Parmalat expanded abroad in the 1970s and listed its shares in 1990. By the end of the decade it was active in 30 countries from Brazil to Australia. But it was also heavily burdened with debt and was nearly bought by US food group Kraft.

Based on its now discredited accounts, Parmalat was Italy's eighth-biggest industrial group by revenues.

How did it crash?
Despite having an investment-grade credit rating and having its shares as a constituent of the Milan stock exchange's blue-chip index, concern grew over the group's failure to explain clearly why it did not use abundant cash shown on its balance sheet to pay down debt.

In February 2003, Parmalat dropped a plan to sell new bonds after news of the issue plan battered its share and bond prices.

Growing worries about Parmalat's accounts and its offshore holding companies deepened last November when the group, under pressure from regulators, said it had nearly €500 million invested in an unknown Cayman Islands fund.

The slide in Parmalat's shares and bond prices turned into a nose-dive when it failed to liquidate the fund and then repaid a €150 million bond in December four days late - and only after help from creditor banks and Italy's government.

On December 15, Mr Tanzi resigned as chairman and chief executive and was replaced by turnaround expert Enrico Bondi.

Parmalat's crisis exploded four days later when it said a four-billion-euro bank account held by a Cayman Islands unit did not in fact exist, triggering a criminal fraud investigation and forcing management to seek bankruptcy protection.

Since then Parmalat has said its debts totalled more than €14 billion, eight times the level previously claimed.

The investigations
Two main groups of prosecutors have been investigating Parmalat's near collapse: one in Milan and the other in Parma.

Documents drawn up by prosecutors show they believe Mr Tanzi and senior Parmalat executives funnelled cash out of the group and covered up losses using a web of offshore companies and forging documents to show non-existent assets and revenues.

The Milan investigators have asked Judge Cesare Tacconi to order the accused to stand trial on charges of market-rigging, false auditing and regulatory obstruction. Judge Tacconi started closed-door hearings yesterday to consider the request.

The most serious alleged crime is market-rigging, or conspiring to issue false information to investors about Parmalat's finances. It is punishable by up to 10 years in jail.

In March another judge turned down the Milan prosecutors' request for a fast-track trial for the same accused on the same charges, ruling there was insufficient evidence to order an immediate trial. That forced prosecutors to resort to the ordinary procedure which can take longer.

Among the accused are Parmalat founder and former chairman Calisto Tanzi, the Italian affiliates of Bank of America and of auditors Deloitte & Touche, and auditor Grant Thornton's former Italian office, Italaudit.

Mr Tanzi has admitted to siphoning off hundreds of millions of euros into family-controlled firms but said others shared blame.

Bank of America has said it would defend itself against any charges. Deloitte & Touche's Italian affiliate has said it met auditing standards when it signed off on Parmalat. Grant Thornton's former affiliate, Italaudit, has denied wrongdoing.

In addition to Bank of America, six foreign and Italian financial institutions are also being investigated, reports have said.

In a separate operation in Parma, near Parmalat's headquarters, prosecutors are investigating possible fraud within the group, with dozens of people under investigation for suspected false accounting and fraudulent bankruptcy.

The most serious offence under investigation in the Parma element of the probe is fraudulent bankruptcy.

Outside Italy, justice officials in the United States and the US Securities Exchange Commission are investigating the Parmalat scandal, as are authorities from several other countries, from the Netherlands and Luxembourg to Brazil.

What happens to Parmalat now?
The group was placed under extraordinary administration in late December after Italy's government rushed through new laws to protect it against claims from creditors.

Parmalat's administrator Enrico Bondi - a renowned turnaround specialist - aims to turn the group into "a leaner, more competitive" Italian multinational.

In July, Mr Bondi unveiled a plan to convert €1.9 billion of debt into shares in a new, slimmed-down company with most creditors recovering less than 12 per cent of their money. Parmalat is due to relist on the stock market in early 2005.

Mr Bondi has barred several international banks from signing up hundreds of millions of euros worth of Parmalat credit for the debt exchange. Some 650 creditors have filed objections to the plan to exclude them from the debt-to-equity swap.

As part of a separate attempt to reclaim lost cash, Mr Bondi is looking to use a provision of Italian law to recover at least €1.6 billion paid by the group's former management to bankers in the year before its demise.

It has sued its former bankers UBS, Deutsche Bank and CSFB in Parma to recover a total of about €550 million.

It has also filed damages cases in the United States worth $10 billion each against Citigroup and former auditors Deloitte and Touche and Grant Thornton. A string of other damages cases is expected.