Ex-MGM Owner Parretti Indicted

Giancarlo Parretti, the colorful fugitive Italian financier who briefly owned the MGM studio in the early 1990s, has been arrested in Italy, and an indictment unsealed Tuesday in Los Angeles accuses him of wide-ranging fraud in his MGM dealings.

Separately, French bank Credit Lyonnais, which financed Parretti’s purchases before seizing MGM from him in 1992 after he defaulted on his loans, admitted for the first time that it played a role in Parretti’s financial shenanigans, authorities said. The bank acknowledged that some unnamed former officers may have committed wrongdoing in dealing with Parretti in the late 1980s and early 1990s.

The bank paid a $4-million fine and could face an additional $10.5 million in fines subject to its cooperation in a continuing criminal investigation in France. Credit Lyonnais sold the studio to its current owner, billionaire Kirk Kerkorian, for $1.3 billion in 1996. Ironically, it was Kerkorian who sold MGM to Parretti in November 1990.

Jay Coggan, an attorney who has represented Parretti, said the admission of wrongdoing by Credit Lyonnais supports Parretti’s long-standing claim that the bank was culpable.

“They have been portraying themselves as a victim all these years. The reality is the bank is not a victim,” Coggan said.

The indictment represents the latest legal entanglement for Parretti. In 1996, he was convicted of perjury and evidence tampering in a Delaware case stemming from his fight to control MGM. He has been on the run from authorities after jumping bail in January 1997, a week before he was to be sentenced in that case.

Since then, Parretti has been convicted in absentia in France on fraud charges related to his MGM dealings, authorities said.

Parretti has been living in Europe and was arrested Sunday near Rome by Italian authorities, in connection with the Los Angeles indictment. Florio Fiorini, a longtime Parretti associate also named in the indictment, also was arrested.

James V. DeSarno Jr., assistant director in charge of the FBI’s Los Angeles field office, said that the arrests in Italy “probably came as a surprise to them. They felt some comfort that they were not in the United States and would not be held accountable.”

Parretti’s brief tenure owning MGM marked one of the stranger chapters in Hollywood. He acquired the studio for $1.3 billion, but it became clear shortly after in court proceedings that he didn’t have the money he claimed in making the purchase and that his business empire was a house of cards.

It also was later revealed in court documents that Parretti had a criminal record dating to the 1970s that included passing bad checks, fraud, conspiracy to commit bodily harm, embezzlement, bankruptcy fraud and tax fraud.

Nonetheless, he briefly enjoyed celebrity status in Hollywood before those details emerged, holding meetings with some of the industry’s most powerful moguls and even being featured on a two-part “Lifestyles of the Rich and Famous” program in which host Robin Leach gushed that Parretti was “the new king of Hollywood.”

The 55-count indictment, handed up in late 1998, but not unsealed until Tuesday because Parretti and Fiorini were at large, covered not only his MGM dealings, but also transactions when Parretti first entered Hollywood in mid-1987 by acquiring control of independent distributor Cannon.

Parretti and Fiorini misrepresented the source of money they were using to take control of Cannon. As it turns out, it had been borrowed from Credit Lyonnais. The two acquired the company, renaming it Pathe.

Authorities also allege in the indictment that the two men tried to bribe Credit Lyonnais executives to influence their lending decisions.

The indictment also alleged that Parretti and Fiorini sold some Pathe cinemas in Europe to a shell company they secretly controlled to create the appearance of a $90-million gain.

Authorities also allege that Parretti misrepresented his finances in buying MGM, making more than $500 million in debt appear to be equity through sham transactions and forged documents.

More than $1.1 billion of the money he used to buy MGM secretly came from Credit Lyonnais, they said.

The indictment also claims that Parretti diverted more than $15 million in MGM’s funds and the European rights to MGM’s famous lion logo to an Italian company he and his wife controlled.

MGM has been burdened for years by onerous deals Parretti cut to raise money for his cash-strapped operation. Earlier this year, MGM paid Warner Bros. more than $225 million to end an unfavorable video distribution deal.

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Times staff writer Jeff Leeds contributed to this report.