Ex-MGM Owner Parretti Settles SEC Investigation

The Securities and Exchange Commission investigation of former MGM/UA Communications Co. owner Giancarlo Parretti ended with a whimper Wednesday with the Italian financier settling a complaint without admitting or denying guilt.

Under terms of the agreement, the flamboyant financier agreed to a permanent injunction promising he won’t violate SEC laws in the future. But he won’t pay a fine or face additional penalties because the alleged violations took place before the SEC was authorized to fine people for the specific violations alleged.

“For four years there was this investigation, and all we’ve wound up with is a piece of paper and no finding that he violated anything,” said Parretti’s Los Angeles lawyer, Jay M. Coggan.

The settlement was announced at the same time the SEC filed a fraud complaint in U.S. District Court in Washington alleging that Parretti and two associates at Pathe Communications Co.--which Parretti formerly ran--made false and misleading disclosures about two transactions, one being the 1990 purchase of the historic MGM studio for $1.3 billion.

Also settling charges were two former Parretti associates, Florio Fiorini, former board chairman of Pathe, and Fernando Cappuccio, Pathe’s ex-chief financial officer. Both live in Switzerland.

In its complaint, the SEC said Parretti and his colleagues failed to record a $255-million loan they arranged when they could not come up with sufficient equity to buy MGM/UA. They also failed to disclose the raising of another $168 million by licensing television and pay-per-view rights in Spain and Italy for certain films and the fact that the deal included a clause that eventually required Pathe to repurchase the license rights for $113 million.

The SEC alleged that Pathe filed documents stating that $570 million of the MGM financing was equity investment by Parretti and Fiorini when part of the money was a loan.

Separately, the agency alleged that a 1989 transaction in which Pathe sold, then leased back, some European theaters was actually a sham deal with a company funded by Pathe and made up of Parretti friends. Pathe improperly booked a gain of $100 million from the transaction, the SEC alleged.

Parretti still faces extradition hearings by French authorities, who have accused him of fraud, embezzlement and misappropriation of assets. He was arrested in October while giving a deposition in Los Angeles, but was freed a month later by a federal appeals court after arguing that keeping him in jail was unconstitutional.

MGM, which recently released the hit films “GoldenEye” and “Get Shorty,” was seized by the French bank Credit Lyonnais in 1992 after Parretti defaulted on loans. It is now owned by an affiliate of the bank and is expected to be put up for sale within the next two years.