Tanzi was handed an 18-year prison sentence in December on separate fraud charges [EPA]

Calisto Tanzi, the founder and former chief executive of Parmalat, has been arrested and jailed, a day after he lost a final appeal against a prison sentence over one of Europe's biggest fraud scandals.

Tanzi, 72, was arrested in his villa in Parma and taken to prison on Thursday in the northern Italian city.

Prosecutors ordered his incarceration after Italy's highest court on Wednesday reduced Tanzi's prison sentence to eight years and one month from 10 years for stock market manipulation related to the collapse of the dairy group in 2003.

Tanzi was also handed an 18-year prison sentence in December on separate fraud charges and along with other former executives was ordered to pay the company $2.9bn and compensate defrauded investors with a sum estimated at about $44m.

Tanzi served nine months in prison during the investigations but had been free pending appeals.

His lawyers had requested Tanzi serve his sentence as house arrest due to his age.

The Parmalat scandal seven years ago destroyed the savings of about 135,000 people, left a gaping $21bn hole in the company's finances and denting the image of one of Italy's leading business empires.

At the time of its collapse, Parmalat employed about 36,000 people in 30 countries.

The company has since recovered and is now the subject of a takeover bid by its French rival Lactalis, which would create the world's biggest dairy firm.

Source: Agencies