Financier Gets Prison Term in MGM Deal

An Italian businessman who admitted acquiring control of MGM studios and an independent production company through a series of sham financial transactions a decade ago was sentenced Monday to 41 months in prison.

Under his plea agreement with federal prosecutors, however, Florio Fiorini will first return to Italy to face three criminal trials and possible prison sentences there.

Afterward Fiorini will return to the United States to begin serving the sentence handed down by Los Angeles federal court Judge Robert M. Takasugi. Fiorini also was fined $100,000 and banished from the United States for 10 years after he completes his sentence.

Fiorini’s former partner, financier Giancarlo Parretti, remains in Italy fighting extradition.

Parretti and Fiorini in 1989 acquired a controlling interest in the Cannon Group, a financially troubled independent production company owned by Israeli filmmakers Menahem Golan and Yorum Globus.

According to an indictment, the Italian financiers failed to disclose to the SEC that virtually all the money they used to acquire Cannon, a publicly traded company, came from loans secretly obtained from Credit Lyonnais.

After renaming the company Pathe Communications Corp., Parretti and Fiorini engaged in a series of sham transactions to artificially pump up the company’s value, according to the indictment.

The indictment said they sold some Pathe cinemas in Europe to a shell company they secretly controlled in order to create the appearance of a $90-million gain for Pathe.

Authorities charged that the pair engaged in the same manipulations when they acquired MGM from Kirk Krikorian for $1.3 billion, failing to disclose that $1.1 billion of the money came from secret Credit Lyonnais loans.

Ultimately, MGM and Pathe collapsed when Parretti and Fiorini defaulted on their loans. Credit Lyonnais seized MGM in 1992 and sold it back to Krikorian in 1996.

Credit Lyonnais was not charged with criminal violations, but it was required to pay $4 million to the United States. The bank admitted that some unidentified former officers committed wrongdoing in dealing with Parretti and Fiorini.

Fiorini could have received up to 45 years in prison on his plea to charges of criminal conspiracy, securities fraud and filing false reports with the Securities and Exchange Commission.

But Assistant U.S. Atty. Jeffrey Isaacs called the plea deal “an excellent result for the government.”

He noted that Fiorini has agreed to cooperate with federal prosecutors in an even bigger case pending against Credit Lyonnais bank.

The U.S. attorney’s office disclosed earlier this year that it has prepared an indictment against Credit Lyonnais and a number of French nationals. It involves allegations that Credit Lyonnais used business fronts to acquire California’s Executive Life Insurance Co. at a fire-sale price from state insurance authorities, who seized the insurer after its large junk bond portfolio collapsed.

Federal law prohibits banks from owning insurance companies, and California law prohibits foreign state-owned companies from owning insurers. Credit Lyonnais was owned by the French government at the time, 1991.

State Atty. Gen. Bill Lockyer has filed a $2.5-billion damage suit against the bank on behalf of Executive Life’s 340,000 policyholders.

Fiorini’s lawyer, Errol Stambler, said his client knows a lot about Credit Lyonnais’s inner workings.