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Parmalat, an Italian company specialising in long-life milk, is suspected of having perpetrated a massive fraud. Billions of euros have gone missing from its books in a scandal that has drawn parallels with the collapse of Enron, the US energy giant.

The company has admitted that the true level of its debt is u20ac14.3bn (u00a310bn) - eight times more than it claimed. Italian prosecutors are trying to convince a judge to order trials for 29 people, ranging from Parmalat's founder to former financial officers, accountants and lawyers.

The questions began in December 2003 when Parmalat had difficulty making a u20ac150m bond payment. The company, which had 36,000 employees, was supposed to have been been sitting on u20ac3.95bn in cash, so Italian bankers were puzzled by its predicament. Parmalat's founder, Calisto Tanzi, brushed bankers' concerns aside, saying the company had a bit of a liquidity problem.

Parmalat's problems quickly reached epic proportions after it made the extraordinary admission that the u20ac3.9bn it thought it had in the bank did not exist. The money was supposedly in a Bank of America account held by Bonlat, a subsidiary based in the Cayman Islands. But Bank of America said there was no such account.

Parmalat's primary auditor was Deloitte & Touche, but the Milan branch of Grant Thornton dealt with some of the company's subsidiaries, including Bonlat. When Grant Thornton checked with Bank of America, the auditor received a letter on Bank of America letterhead confirming the existence of the account. However, Bank of America said the letter was forged.

The Italian units of Bank of America and Deloitte & Touche are among the defendants prosecutors want put on trial, as is the former Italian affiliate of Grant Thornton, which the auditor has now got rid of. Two partners of that affiliate have been sent for trial in January. They are the first individuals to be prosecuted in the scandal.

Investigators have been trying to find out. There are suspicions that company executives invented contracts that were shown to the banks in order to raise cash that was then used to cover up day-to-day losses.

"The money was there in the first place but it got lost along the way," a US analyst said. Some press reports say as much as u20ac10bn has disappeared from the company's accounts.

Some analysts did voice concern about Parmalat's rapid expansion. The company started as a peddler of prosciutto in a small northern Italian hamlet but grew into a dairy giant selling long-lasting milk and other milk products in 30 countries, and employing 36,000 people. The global expansion started with an acquisition in Brazil in the mid-1970s.

As the company grew, so did its debt. It was bailed out in 1990, with the Tanzi family giving up 49% of its control of the company.

Parmalat returned to the acquisition trail a few years later and bought US food giant Beatrice Foods in 1997. Other deals followed, taking the company into China, Australia and Mexico. In the process, Parmalat's debts grew to u20ac6bn, but investors kept buying the company's bonds on the strength of its supposed cash pile. But at least one analyst thought the bonds too risky, describing them as "junk bonds in drag" two years ago.

The company was founded by Calisto Tanzi, a university dropout who transformed a family business, Calisto Tanzi & Sons - Salamis and Preserves into an organisation hailed as one of Europe's biggest corporate success stories.

Along the way, he relied on Fausto Tonna, who was the company's finance director for 16 years. "Tonna was a bit of a peasant in his manners but had an extremely sharp mind for finances," said a banker who met him. If anyone has the answers it will be Mr Tanzi and Mr Tonna, who have both stepped down.

The company has sought protection from its creditors after the Italian government rushed through an emergency decree that would allow companies to apply to the industry ministry to appoint an administrator with immediate powers.

Enrico Bondi was appointed special administrator of the company in December 2003. Mr Bondi won acclaim for handling the break-up of the Ferruzzi family's business empire, Italy's biggest corporate crisis of the 1990s.

Parmalat is now in administration, so it enjoys protection from its creditors. But at some point it will probably have to sell off many of the companies it has acquired over the years. Analysts say the company was quietly seeking to offload assets in Mexico, Brazil and the US up to two years ago in an attempt to reduce its debts, but it was asking prices nobody wanted to pay.

It will be different now, with Parmalat in a much weaker bargaining position. Global players such as Nestlu00e9 and Danone would be the most likely candidates to pick up some of the Parmalat pieces. Parmalat will probably survive, but in much shrunken form.

Shares in the company, which once had a market value of u20ac1.8bn, are worthless, so millions of investors are out of pocket. Bank of America is thought to have provided between $150m (u00a384m) and $250m in loans to Parmalat, but those are trivial sums for America's third biggest bank.

Parmalat has reached a settlement with Deloitte & Touche and Dianthus over their role in the accounting scandal of 2003. Deloitte & Touche and Dianthus the firm that operated in Italy have committed to provide Parmalat with total consideration valued at $149 million.

How Parmalat committed accounting fraud before 2003? How much it cost Deloitte Italy to settle this accounting fraud case? What are the lessons you learn from this European audit failure?

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