Kerkorian Strikes Back : Suit Is Latest Episode of Brawl Over MGM

Billionaire Kirk Kerkorian sued French banking giant Credit Lyonnais for $675 million Thursday, alleging that the bank engaged in a giant “shell game” to facilitate Giancarlo Parretti’s ill-fated 1990 purchase of the historic MGM/UA studio.

Kerkorian’s lawsuit is the latest in what has turned into a nasty legal brawl between the reclusive financier and Credit Lyonnais, which has owned MGM since foreclosing on Parretti last year. Earlier this month, Credit Lyonnais and MGM fired the first shot by suing Kerkorian, alleging that he left the studio in financial shambles when he sold it to Parretti for $1.3 billion.

In his lawsuit, Kerkorian accuses the world’s ninth-largest bank of supplying misleading financial information and shifting money to cover up its shaky loans to companies affiliated with Parretti, an Italian businessman who bought the studio through his Pathe Communications.

Had Parretti failed to complete the purchase, Kerkorian alleges, Parretti’s empire would have unraveled even earlier than it did, forcing Credit Lyonnais to recognize hundreds of millions of dollars in losses on questionable loans and to disclose details of its Parretti loans to Dutch and French banking authorities.

Kerkorian, who received about $1 billion in the transaction, nonetheless is claiming that he suffered damage as a result. Had Parretti failed to complete the purchase, Kerkorian and other MGM shareholders would have kept the studio and still received about $400 million in non-refundable payments Parretti made after agreeing to buy MGM/UA, the lawsuit alleges.

“That is no small amount. If Credit Lyonnais had not misrepresented it, we would have the studio and $400 million in cash. We could have kept running the studio or sold it to someone else,” said lawyer Patricia L. Glaser, who filed the lawsuit for Kerkorian.

Credit Lyonnais spokesman Fred Spar said the bank denies Kerkorian’s allegations and believes that he defrauded the bank in the sale. He added that the bank is puzzled as to why Kerkorian is claiming that he was damaged when he succeeded in selling the studio.

“Who walked away from this whole thing with $1 billion?” Spar asked.

Kerkorian is joined as a plaintiff by his Tracinda Corp., along with former MGM Chairman Jeffrey Barbakow and Stephen Silbert, a former MGM/UA director. The lawsuit alleges fraud, conspiracy and violations of the Racketeer Influenced and Corrupt Organizations Act.

The filing of the lawsuit on Thursday was clearly prompted by the $1.25-billion lawsuit filed earlier this month by Credit Lyonnais and MGM. The lawsuit is said to have infuriated Kerkorian, 75, who now runs Las Vegas-based MGM Grand.

The French-owned bank’s ties to Parretti have become a huge political embarrassment in France, where elections are scheduled in March. In addition to providing $1.1 billion to Parretti to finance the purchase, financial experts estimate that the bank is spending as much a $350 million to $400 million annually to keep the studio afloat.

Sources close to Kerkorian note that the bank’s lawsuit, originally filed in federal court in Los Angeles, was quietly refiled in state court instead.

They contend that it was done to make sure the case is still active--cases usually come to trial faster in federal court--through the upcoming French elections so the bank can defuse criticism by claiming that it is trying to recover some of its money.

But Spar said that the allegation is absurd and that the change was made for technical legal reasons.