Financing Details Add Bizarre Twist to MGM Saga : Hollywood: Giancarlo Parretti's scramble to buy the studio last October included a possible CIA operative and several members of the secretive Knights of Malta.

TIMES STAFF WRITERS

Giancarlo Parretti's tenure as chief executive of MGM-Pathe Communications Co. may have ended with his forced resignation last week, but new details of his bizarre business dealings continue to surface even as the beleaguered movie studio struggles for survival.

The latest characters to emerge as players in the MGM story include a possible CIA operative, a mysterious Italian businessman accused of fleeing the country with $500,000 that was set aside for the studio purchase, and several members of the secretive Knights of Malta.

The group came together as Parretti scrambled to secure the final $210 million needed to complete the MGM purchase last October, according to Washington court records and parties to the discussions. Sources say Parretti acted out his own variation on "The Desperate Hours" as the deadline for closing the much-delayed $1.4-billion deal bore down.

Those recruited for the emergency fund-raising effort included Italian businessman Nino L. Sanna, who has been linked to the disappearance of the $500,000; Joe Kelso, a self-styled financier with reported ties to the CIA, and members of the Knights of Malta, O.S.J, a New York organization unrelated to the 11th-Century order of knights affiliated with the Vatican.

The financing plan was supposed to return big dividends to Parretti's partners. While it ultimately collapsed, the convoluted deal illustrates how far Parretti went to gain control of MGM. It also helps explain why the troubled studio slipped through his hands just six months later.

Sources say Parretti's dealings have become the focus of a Securities and Exchange Commission investigation. At least one individual close to Parretti has been asked to provide extensive information to the commission. And while there have been no accusations of wrongdoing, sources say Parretti's eleventh-hour loan discussions are part of the probe.

People close to those discussions say Sanna served as the catalyst to the negotiations that consumed much of last October. The Italian businessman reportedly introduced Parretti to Prince Arnaldo Petrucci,leader of a New York-based Knights of Malta chapter.

Parretti was subsequently admitted to the Catholic charitable group in a church ceremony followed by a lavish reception. The executive reportedly made a sizable donation to the organization in return for the knighthood. But, according to a close associate, Parretti was unaware that the New York knights were unrelated to the more august, ancient order in Rome.

Shortly before the induction, Petrucci and an associate introduced Sanna to attorney Donald O. Clark at a private luncheon. The four discussed Parretti's search for funds, and Clark shortly afterward introduced Sanna to Kelso, according to undisputed claims in a lawsuit filed against Clark's law firm by Melia International, a Dutch firm controlled by Parretti.

Petrucci and Sanna could not be reached for comment, and Clark declined to discuss his dealings with Parretti. Several people who met Kelso have said they believe him to be the same Joe Kelso named in a Penthouse magazine story last November as a sometime associate of the CIA and who surfaced briefly in Oliver North's diary.

Kelso, who now lives in the Western United States, confirmed the details of the story as they pertain to him in a recent interview. He said he remains in the financing business.

Documents filed by Melia show that Parretti entered into a financing agreement with Kelso on Oct. 17. Under the terms of the written agreement, Parretti granted to Kelso a security interest in 32 million shares in various companies, in exchange for Kelso finding the $210 million in financing. The stock was valued, according to Parretti's own court submissions, at $290 million and included 10 million shares in MGM/UA Communications and another 10 million in Pathe Communications.

Kelso was to receive $10 million for his services, according to the agreement. A separate document signed later and filed with a Cook Islands court by Century Insurance Ltd.--which was to bond the Kelso deal, and whose chairman, Donald Davies, was doing business with the Knights of Malta--shows that Parretti sealed his deal with a written promise to the fraternal order.

On Oct. 24, the talks moved ahead as a small group of deal makers sat impatiently around a conference table at 95 Wall St. in the New York offices of Credit Lyonnais, the European banking giant that served as Parretti's chief lender in the MGM deal, sources say.

Parretti stopped in briefly at about 7 p.m. and then took off. Half a dozen bankers and others stayed, waiting for the delivery of the $210 million that, along with other funds raised by Parretti, would allow him to take control of MGM.

Parretti already had raised more than $1 billion of the financing through a patchwork of Credit Lyonnais loans; sales of film rights to Turner Broadcasting System, Time Warner Inc. and others, and transactions with his European affiliates that have yet to be fully disclosed.

Kelso had promised to secure a letter of credit from one or more of the world's major banks. People close to the discussions say Kelso told his fellow deal makers at the table that he was associated with the Central Intelligence Agency and other government organizations--a claim that could not be independently verified.

All that mattered at the time, however, was that Kelso seemed unable to deliver. He came to the bank from his nearby office at 9 p.m. and made some agitated calls to his connections, parties to the discussions say. At one point, he said he was having the letters of credit flown in on an F-14 fighter plane. By 11 p.m., the deal makers gave up for the night, leaving Parretti to devise yet another plan to finance his much-delayed studio purchase.

In an Oct. 25 letter to Petrucci and the knights, Parretti gave his "irrevocable personal and corporate guarantee" that he and his corporations were capable of repaying the $210 million. Parretti apparently was extending his word of honor as a new member of the group.

But by the following weekend, it became clear that Kelso would not deliver the funds. In an interview with The Times, Kelso said he withheld the money pledged to Parretti because of his concerns that Parretti would not deliver on his end of the bargain. Kelso did not dispute reports linking him to the CIA but called it "old business."

After the collapse of the Kelso deal, Parretti returned to Los Angeles on a plane with Davies. The two soon devised a receivables financing plan that reportedly allowed the transaction to close. Under the plan, Davies posted a $175-million insurance bond against future sales of programming, according to court documents filed in a Cook Islands lawsuit. Parretti offered up 30 million shares in various companies as collateral. Davies was also promised a $1.75-million fee, the lawsuit asserts.

In mid-November, Sanna--reportedly acting as a representative of Melia--withdrew the $500,000 from an escrow fund that had been established in connection with the MGM deal. Clark had been holding the money as a default fee to be paid to Kelso if Parretti backed out of his deal, according to Washington court records.

Kelso's New York-based Kelso Holding Co. closed its Wall Street office shortly after that deal unraveled. An MGM-Pathe spokesman declined to comment on the failed deal or Parretti's relations with Kelso and Sanna.

In a lawsuit filed in Washington this month, Melia charged Clark's law firm--Kaplan, Russin & Vecchi--with improperly giving Sanna the $500,000. Melia's lawsuit says Sanna "absconded" with the money. The law firm insists that Sanna received the escrow funds as Parretti's agent.

Numerous people have linked Sanna to Parretti. One person involved in the financing discussions described Sanna as Parretti's right-hand man. In addition, a July 2, 1988, story from the Spanish newspaper El Pais identified Sanna as an associate of Parretti's operations in Spain.

Yet, Parretti's lawsuit now claims that Sanna never represented him in any capacity. Several people who met Sanna last fall say they believe that he may now be in Uruguay or Brazil.

Six months after he finally bought MGM on Nov. 1, Parretti is now struggling to keep the company alive. The studio has missed crucial debt payments, angering creditors who have tried to put the company in bankruptcy.

It has also angered once-friendly bankers at Credit Lyonnais, who forced Parretti to step aside as chief executive in favor of studio chief Alan Ladd Jr., even though he controls 90% of MGM's corporate parent. (After Parretti's resignation, the bank pledged an emergency cash infusion of $145 million to the studio.)

Times staff writer John Lippman contributed to this story.

THE CAST OF CHARACTERS Giancarlo Parretti: The Italian financier pulled off the $1.4-billion purchase of MGM last fall, after several delays. Was recently ousted as chief executive of financially troubled MGM-Pathe Communications but still controls 90% of MGM's corporate parent.

Nino L. Sanna: Mysterious Italian businessman described as a close associate of Parretti's. Parretti denies the link. Served as a catalyst to last-minute MGM loan discussions in New York. Accused in a lawsuit of disappearing with $500,000 earmarked for the MGM purchase.

Joe Kelso: A self-styled financier involved in an aborted plan to lend Parretti $210 million toward the MGM purchase last fall. Vacated his New York office when the deal fell through. Claims to have worked for the CIA. May have also been mentioned in Oliver North's diary.

Prince Arnaldo Petrucci: Reported leader of the secretive New York branch of the Knights of Malta, which is not connected to the more august Vatican order. Served as a go-between in discussions over Kelso's possible loan to Parretti. Also inducted Parretti into the order.

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