MGM-Pathe Being Investigated by SEC, Sources Say

The Securities and Exchange Commission has launched an investigation into the financial dealings of MGM-Pathe Communications Co., knowledgeable sources said Monday.

One individual, who declined to be identified, said he was asked Friday by the SEC’s Division of Enforcement in Washington for extensive information regarding his dealings with the studio.

An investigation by the SEC does not necessarily indicate any wrongdoing. Sandra Harris, bureau chief for the enforcement division of the SEC in Los Angeles, declined to comment. Craig Parsons, a spokesman for MGM-Pathe, said the company was “not aware of any investigation.”

Separately, MGM-Pathe, which is defending itself against an involuntary bankruptcy petition filed by a group of its creditors, failed again Monday to file its annual 10-K financial report with the SEC.

A spokesman for MGM-Pathe said that its outside auditors still had not completed their review of the company’s finances, but that a new 10-K report is expected to be filed by the end of the week. The company had already been granted an extension until Monday. The report, originally due March 29, is expected to include MGM’s first detailed financial statement since Parretti acquired the studio last year.

The struggling MGM-Pathe, formed in a $1.4-billion deal last November by Italian financier Giancarlo Parretti, is negotiating with its bankers for a cash infusion to keep the company running so it can release several upcoming films.

The company has also not yet filed a proxy statement for a special shareholders meeting to approve the payment of 57 million new MGM-Pathe shares to Parretti-related firms in exchange for the $570 million that they paid to help acquire MGM/UA last November.

As reported, Century Insurance Ltd. has sued MGM-Pathe’s largest lender, Paris-based Credit Lyonnais, charging that Parretti never paid Century its fee for securing a loan from the bank.

Century, a small insurance company in the Cook Islands, is expected to file a 13-D form with the SEC, possibly as early as today, reflecting its claim that it owns as much as 35% of MGM-Pathe. The studio has dismissed that claim as “bogus.”

In another matter Monday, U.S. Bankruptcy Court Judge Arthur Greenwald ruled that the group of creditors--which includes Century Insurance--that are seeking to force MGM-Pathe into bankruptcy would have to submit to depositions from MGM-Pathe lawyers.

But Greenwald also denied a request by MGM-Pathe’s lawyers to depose Stephen Chrystie, an attorney for the creditors. MGM-Pathe lawyers said they plan to fight the petition and seek penalties against Chrystie and the creditors for what the lawyers have called an improper filing.

MGM-Pathe is also expected to announce shortly that Alan Ladd Jr., chairman of MGM-Pathe Pictures, will be given an expanded role in the running of the company. He will apparently take over many of the duties now assumed by Parretti, who is reportedly under pressure from Credit Lyonnais to step aside. The company has denied that Parretti intends to resign.