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In the final months of last year, faced with a hidden but looming bankruptcy, the Italian food-and-dairy conglomerate Parmalat was desperate for money. Officially, it had j3.95 billion in cash on its books; in reality, it had debts of j14 billion and no cash at all. Unless the firm could raise new money fast, it would collapse and the most spectacular alleged fraud in European corporate history would be exposed.

At that point, two of Europe's biggest banks — Switzerland's UBS and Germany's Deutsche Bank — stepped in. Both injected fresh funds into Parmalat — but at a huge cost to the fast-sinking company. Deutsche Bank kept it afloat by buying Parmalat bonds to the tune of j41 million — but on condition that Parmalat immediately pay off j17 million it already owed the bank. (Parmalat still owes Deutsche Bank j38 million.) UBS agreed to buy j420 million in bonds from Parmalat, but put up just j110 million in cash for them. In a complex transaction, UBS exchanged j290 million of the rest for credit-linked notes issued by a Portuguese bank in the Cayman Islands, which were then transferred to Parmalat. The notes came with a tough default clause that was triggered when Parmalat went bankrupt in December. The upshot: the j290 million went back to UBS.

The banks don't dispute these transactions. The question is: Did the banks demand the unusually aggressive deals because they knew how perilous the company's financial situation was? And if so, could those deals be construed as contributing to Parmalat's downfall?

The banks' answer is, emphatically, no. They say the deals were proper, and that Parmalat's dire reality was hidden from them. But Enrico Bondi, the Italian turnaround expert who in December was appointed Parmalat's bankruptcy commissioner, alleges that the answer is yes — and this month he filed suit in Parma's court against the two banks, claiming that both transactions were illegal under Italian bankruptcy law and should be revoked. Last month he filed suit in New Jersey against Citigroup, alleging that the American bank helped Parmalat's founder, Calisto Tanzi, and other insiders loot about $8 billion from the firm. Citigroup denies any wrongdoing. Bondi isn't talking, but people close to him say that other suits are likely.

Bondi's job is to breathe new life into one of the largest bankrupt companies in corporate history. Why is he spending his time chasing after spilled milk? As it turns out, legal action against international banks is a key element of his strategy to bring the firm out of bankruptcy as early as the beginning of next year. Big foreign banks are natural targets because they helped to arrange for about 80% of Parmalat's bank debt. In a confidential report for the Italian government seen by Time, Bondi and his team pin much of the blame for the company's collapse on "large-scale and ever more costly" financings arranged by banks, often through offshore tax havens. In other massive international bankruptcies, regulators and others have forced big settlements from enabling banks. After its bankruptcy, Enron sued its own lenders; that suit is pending. In May, investors in the bankrupt telecom giant WorldCom received a $2.65 billion payout from Citigroup.

So far, Parmalat's other creditors are cheered by Bondi's hardball tactics. "The more value there is in the estate — for any reason — the better it is for us," says Attorney Evan D. Flaschen of the U.S. law firm Bingham McCutchen, who represents about 100 institutions including insurers and pension funds that together hold about $2 billion of Parmalat bonds.

But Bondi needs Parmalat's big creditors — of whom the banks are the biggest — to approve his restructuring plan by the end of this year. Critically, that involves persuading them to convert their debts into equity in the slimmed-down postbankruptcy Parmalat, which Bondi hopes to float on the stock market as early as next year. And right now, the banks don't sound too happy with Bondi. UBS says it believes its transaction was "entirely valid" and that it will vigorously fight the case. Citigroup says that "Mr. Bondi's hostility toward the banks is a cynical tactic." Deutsche Bank says Bondi's suit is unfounded and that it "fully intends to defend" its position.

Already, some U.S. bondholders are crying foul: while the restructuring plan gives them and other Parmalat creditors just a few cents on every euro that they put into the company, the holders of bonds of two subsidiaries are being offered the chance to convert 100% of their debt into equity in the new firm. They happen to be largely Italian bank and retail investors. That may end up playing well to a home audience. Bondi's dilemma is that he needs the foreigners on his side, too.

• PETER GUMBEL
• Bankrupt Parmalat points the finger at its lenders