The action alleges that the defendants engaged in a scheme to defraud the investing public by issuing a series of material misrepresentations to the market during the five-year period covered by the suit. The defendants' statements were allegedly misleading because they failed to disclose or misrepresented the following: (1) that Parmalat's assets in its audited financial statements were overstated; (2) that the company falsely stated that it had used its excess cash balances -- which actually did not exist -- to repurchase corporate debt securities worth 2.9 billion euros (approximately $3.6 billion), when it had not repurchased those debt obligations and they remained outstanding; (3) that the $625 million of Parmalat's cash allegedly invested in a liquid investment fund in the Cayman Islands could not be retrieved because it was falsified; (4) that the company used off-shore shell companies, such as Bonlat Financing Corporation, Buconero, LLC, and Epicurum to falsify its financial results; (5) that defendants Calisto Tanzi and Stefano Tanzi siphoned as much as 800 million euros ($1 billion) from Parmalat operations, mainly to finance other family businesses; (6) that the company lacked adequate internal controls and was therefore unable to ascertain its true financial condition; and (7) that as a result, the values of Parmalat’s net income and financial results were materially overstated at all relevant times.

On December 9, 2003, defendant Calisto Tanzi, then Parmalat's Chairman and Chief Executive Officer, and his son, defendant Stefano Tanzi, a senior Parmalat executive, allegedly met with representatives from a New York City-based private equity and financial advisory firm regarding a possible leveraged buyout of Parmalat. During that meeting, in response to a comment by one of the Tanzis about liquidity problems at Parmalat, one of the New York firm's representatives noted that Parmalat's financial statements showed that the company had a large amount of cash. In response, defendant Stefano Tanzi stated that the cash was not there, and that Parmalat really had only 500 million euros in cash. Later, defendant Luciano Del Soldato, then Parmalat's Chief Financial Officer, joined the meeting. During a discussion of Parmalat's outstanding debt, Mr. Del Soldato stated that Parmalat's debt was actually 10 billion euros, much higher than the balance sheet showed. Mr. Del Soldato indicated that the balance sheet was incorrect because the company had not repurchased 2.9 billion euros of Parmalat bonds. The balance sheet falsely reflected that the bonds had been repurchased. These events eventually led to Parmalat's December 29, 2003, announcement that it had been declared insolvent by an Italian Court.