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So far, 29 people have been charged in Milan; more are expected to be charged in coming weeks by magistrates in Parma. Parmalat's losses are now officially put at €12 billion and its investors have lost another €14 billion — though the company's 33,000 employees have emerged relatively unscathed, as the firm continues to operate while in bankruptcy. Most of the money that moved in, around and out of the company has since been traced, although the final destination of some of it is still unknown. Tanzi has admitted transferring some €500 million to family firms, but investigators tell Time that up to €1.3 billion may have gone this route.

But one huge mystery remains: how could such a crude forgery have continued for so long, and on such a massive scale? For years, Parmalat dealt with the world's largest banks, its most sophisticated investors and its most reputable auditors. How did they miss the signals that the company was cheating? It's not an academic question: if Parmalat had gone bust in 1995, when it could no longer fill all its funding needs in Italy, it would have been a mid-sized Italian failure with debts of about €560 million. Instead, Parmalat took its warped finances global. By the time of the collapse eight years later, it owed its investors €14 billion. Bank of America alone, beginning in 1997, arranged $1.7 billion in financing through bonds and private placements for U.S. investors, and received more than $30 million in fees and commissions. Citigroup systematically packaged and resold the firm's receivables, even installing its own software at Parmalat headquarters to help track them; between 1999 and 2003, it earned $35 million. Grant Thornton and Deloitte & Touche signed off on its increasingly surreal accounts and booked millions of dollars in fees for doing so. In the company's final weeks, Deutsche Bank took on the assignment of helping it work with Standard & Poor's, which kept its "investment grade" rating on the firm until 10 days before the collapse. And analysts worldwide encouraged investors to keep buying its stocks and bonds. According to one study, 75% of the analysts covering Parmalat had a "buy" or "neutral" rating on the stock three months before it collapsed.

Were these financial stalwarts victims of Parmalat's deceptions? Or, as the failed company's bankruptcy administrator Enrico Bondi alleges, were they more like well-paid enablers, looking the other way while helping Parmalat hobble toward ruin? That question will come to a head this week as Giuseppe Coscioni, the Parma judge overseeing the bankruptcy, must decide whether foreign banks claiming they are owed hundreds of millions will be included in the list of creditors. "The risk for Parmalat is that if the international banks are cut out as creditors, they could make life very tough for the company when it emerges from bankruptcy next year," says one person close to the U.S. banks.

FUNDING THE "BLACK HOLE"
Alberto Ferraris wasn't the only one who thought highly of Calisto Tanzi. Until Parmalat collapsed, the 66-year-old founder was an almost legendary figure in Italy, viewed as a classic entrepreneur who built a world-class company from scratch. Soon after founding Parmalat as a dairy company in 1961, he was quick to embrace a new pasteurization technology that allowed milk to stay fresh for months without refrigeration. Parmalat's distinctive cartons soon became a fixture in stores across Italy, and ultimately conquered Europe and much of the world. Tanzi also discovered the power of sports marketing, and plastered the Parmalat name on events from World Cup skiing to Formula One racing. A pious Catholic, Tanzi was a generous benefactor who sponsored the restoration of Parma's 11th century basilica and funded its professional soccer team. And he seemed modest about his achievements. He didn't smoke, drank little and drove his own Lexus.

Behind his company's facade of success, however, a hole kept growing. Parmalat's finances were in poor shape by the late 1980s as a result of a disastrous foray into

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nginx/1.14.0 (Ubuntu) television, according to the testimony of top executives. In 1987, it spent €130 million on a station called Odeon TV that it hoped to build into Italy's third major network, but which collapsed after three years. To stave off bankruptcy, Tanzi engineered a so-called reverse merger, under which it sold itself to a dormant holding company already listed on the Milan stock exchange. The combined firm then raised about €150 million from outside investors. That enabled Parmalat to go public in 1990, and plug some of the gaps in its accounts; at the time it had a market value of around €300 million. But as early as 1993, Parmalat allegedly began to invent financial transactions to pad its balance sheet. Investigators in Milan and Parma agree: if it hadn't cooked the books, Parmalat would have posted losses every year from 1990 to the end. Instead, it posted profits, masking its problems with a mixture of fictitious transactions and aggressive acquisition; starting in 1992, the group began snapping up dairy and other companies in Italy, Brazil, Argentina, Hungary and the U.S. "It was a reversal of logic," says Vito Zincani, the chief investigating magistrate in Parma. Usually, companies take on debt to grow. But in Parmalat's case, "they had to grow to hide the debt."

The core of the fraud was a system of double billing to Italian supermarkets and other retail customers. Simply put, by billing twice for the same shipment of merchandise, Parmalat could create the impression that its accounts receivable were much larger than they really were. One of the Parmalat executives who operated the scheme, Claudio Pessina, told Milan magistrates that as many as 300 people at Parmalat knew of it. But if anybody thought there was something wrong, they didn't say so publicly.