Parretti Tells Court He Was Betrayed by Credit Lyonnais

WILMINGTON, Del. —  Giancarlo Parretti, the main shareholder of MGM-Pathe Communications, took the witness stand Tuesday in his fight to regain control of the movie studio, presenting himself as a prudent manager who had been betrayed by bankers.

Testifying through an interpreter in Delaware Chancery Court, Parretti denied staging a sham board meeting in an effort to circumvent new management that was put in place by the company’s main lender, Credit Lyonnais Nederland. And he took frequent swipes at Alan Ladd Jr., MGM-Pathe’s current chairman, who earlier had accused Parretti of driving the studio to the brink of extinction. The Italian-born entertainment entrepreneur asserted that he had no choice but to try to block some of Ladd’s management decisions, in part because Ladd’s films were disasters.

The testimony came during a trial that began Aug. 27 in the state where MGM-Pathe is incorporated. Credit Lyonnais sued to oust Parretti and associates from MGM-Pathe’s board. The bank claims that they had violated an agreement to turn over management to Ladd after the bank agreed to inject $145 million into the company to fend off an attempt by trade creditors to force it into involuntary bankruptcy proceedings.

Parretti, in a countersuit, seeks reinstatement and claims that the bank sabotaged his plans to raise funding for the company after he bought a 98% stake in MGM-Pathe last November from financier Kirk Kerkorian for $1.3 billion.

The trial resumed Monday after a two-week recess. The wrangle is only part of Parretti’s extensive legal problems, which include an order by the U.S. Immigration and Naturalization Service to leave the U.S. by Nov. 1. The INS asserts that Parretti failed to disclose on his visa application that he has a criminal record. Parretti is contesting the order.

Under questioning from attorney Richard Sutton, who represent’s Parretti’s Pathe Communications Co., Parretti said in court Tuesday that as the threat of involuntary bankruptcy loomed for MGM-Pathe, the bank pressured him in April into signing voluminous documents that he didn’t have time to read. He said he told Credit Lyonnais officials, “I was going to sign these papers only because they had put a machine gun to my head.”

The papers included an agreement giving Ladd full management control. But Parretti claimed that bank officials gave him verbal assurances that he would retain broad powers, including control over MGM-Pathe’s foreign subsidiaries. He testified that bank officials later reneged on the assurances.

Parretti asserted that he had a right to protect his investment and question Ladd’s management decisions “because I had put $500 million into the company, which was my entire life’s work.”

Parretti charged that Ladd gave extravagant raises, as well as generous golden parachutes to certain executives, and gave a company his daughter was involved with a $250,000 contract. Attorneys for Ladd denied the allegations.

The bank contends that Parretti deliberately ignored his agreement to turn over management control, attempted to siphon money out of the company and sent written and oral instructions to officials of MGM-Pathe subsidiaries to ignore Ladd’s orders and report only to him. The bank also contends that Parretti convened a meeting of MGM-Pathe’s board and, ignoring the absence of a quorum, passed resolutions restoring Parretti as chairman and canceled employment contracts with management.

Parretti said Tuesday that the resolutions were only suggestions and that he didn’t consider the meeting to be a real board meeting.

Parretti is to testify through Thursday and will be cross-examined by Howard Weitzman, a lawyer for MGM-Pathe and the bank. Weitzman in an interview denied that bank officials had made an oral commitment to leave Parretti in charge of MGM-Pathe’s foreign subsidiaries.

“It makes no sense that the bank would come to the rescue with $145 million and make an agreement that nothing would change,” he said.