Financier in MGM Scam Gets Plea Deal

An Italian businessman accused of acquiring MGM studios through a series of sham financial transactions appeared in federal court in Los Angeles on Friday after negotiating a plea agreement that will send him to prison for 41 months.

Florio Fiorini, who was escorted from Italy by federal marshals, posted bail of $250,000 and was released pending arraignment Monday.

His former partner, flamboyant financier Giancarlo Parretti, remains in Italy, fighting extradition.

Under terms of the agreement, the 60-year-old Fiorini will plead guilty to conspiracy, securities fraud and filing false reports with the Securities and Exchange Commission.

The deal also calls for him to cooperate fully with the FBI, the SEC, the Federal Reserve and other government agencies.

Defense lawyer Errol Stambler said prosecutors are especially eager to obtain Fiorini’s testimony about Credit Lyonnais, one of France’s largest banks, which financed the MGM acquisition.

“My client knows a lot,” said Stambler. “He can be very helpful.”

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 in a separate case--a deal that cost policyholders of a now-defunct California insurer billions of dollars.

The indictment involves allegations that Credit Lyonnais used business fronts to acquire 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 of the transaction in 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.

Assistant U.S. Atty. Jeffrey Isaacs, who heads the Credit Lyonnais investigation, confirmed that Fiorini would be questioned about the bank “and a number of other matters” that he declined to disclose.

Parretti and Fiorini launched their foray into Hollywood in 1989 when they 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 a federal grand jury indictment returned in 1998, 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. The indictment charged that they tried to bribe bank officers.

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.

It alleges that they sold some Pathe cinemas in Europe to a shell company they secretly controlled 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 Kerkorian 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 Kerkorian in 1996.

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

In addition to serving a 41-month prison term, Fiorini will be fined $100,000 and will be banished from the United States for 10 years after he completes his sentence.

But U.S. officials have agreed to give Italy first crack at him. The plea agreement calls for the United States to return him to Italy within 45 days so authorities there can complete criminal proceedings against Fiorini in seven pending cases involving fraudulent bankruptcies.

He will be returned to this country after he serves any sentence he receives in the Italian prosecutions.