(FORTUNE Magazine) – When details about the alleged fraud at Parmalat first emerged before Christmas, it was big news everywhere--except in Parma, the dairy giant's hometown. While the Italian national press devoted pages to the scandal, including eye-popping revelations about a Bank of America account with $5 billion that never existed, the local Parma newspaper provided the scantest of coverage to what should have been the biggest story in its 269-year history. The reason: La Gazzetta di Parma is owned by the local industry association, which in turn has long been dominated by Calisto Tanzi, Parmalat's founder. "It was scandalous--a classic case of omerta," says one outraged Parma businessman, using the word for "silence" normally associated with the Sicilian Mafia.

Such coziness has long been an integral part of Italian business, where an estimated 99% of companies are family controlled, and it may help explain in part how Parmalat was able to get away with cooking the books for at least a decade, as the company's former finance chief has told prosecutors. Truly independent directors remain a rarity even at listed Italian companies, external scrutiny tends to be casual, and conflicts of interest are rife. "At one level Tanzi did what all Italians do," says Umberto Mosetti, a corporate law professor at Siena University. "He treated a public company as if it were his own cash." But even by Italian standards Parmalat is a big deal. The total so far unaccounted for is $9 billion--and the international attention it has received has taken Italy by surprise. The result is an intriguing national debate: Could Parmalat spur the sort of sweeping change to Italian family capitalism that Italy itself has long resisted?

Within days of Parmalat's meltdown, the Italian government acted with uncharacteristic speed to alter its bankruptcy rules. Parts of the bankruptcy code date back to the Mussolini era, and it has long been criticized for giving only a consulting role to creditors while imposing draconian penalties on debtors (one clause prevents them from picking up their mail or leaving their residence without a court's consent). The new decree, inspired by Chapter 11 of the U.S. Bankruptcy Code, affords Parmalat a degree of protection while the new chief executive, turnaround expert Enrico Bondi, tries to salvage what he can.

Finance Minister Giulio Tremonti is trying to consolidate the mishmash of notoriously lax Italian financial and stock market regulators--there are at least four--into a single, powerful agency along the lines of the Financial Services Authority in Britain. But change won't come easily. The Bank of Italy is furiously contesting Tremonti's plan because it doesn't want to relinquish its role overseeing the banks. And the biggest obstacle to reform may be Prime Minister Silvio Berlusconi, who built his fortune the old-fashioned Italian way. His Mediaset empire stands to benefit the most from new rules loosening restrictions on the ownership of national TV stations that he pushed through Parliament in December. Last year--four years after Berlusconi himself was indicted on charges of false accounting--his government watered down the offense from a felony to a misdemeanor. "This government must be the least qualified to introduce real change," says Angelo Bettinzoli, the CEO of Sabaf, one of the few family-controlled Italian companies that publicly embraces U.S.-type corporate governance. The rest, it seems, are more than happy with omerta.

--Peter Gumbel