Kirk Kerkorian slapped a $ 675 million lawsuit on Credit Lyonnais yesterday, retaliating for last week’s $ 1.25 billion lawsuits CL and MGM filed against the former MGM owner. Kerkorian charged the French bank with racketeering, fraud and conspiracy.
The suit says the bank lied and alleges that Kerkorian and the former MGM/UA board of directors would not have allowed Pathe Communication’s leveraged buyout/merger of the company if they had known all the facts about Pathe’s shaky financial status. MGM has struggled financially since Pathe took over the company.
Kerkorian and his Tracinda Corp., former CEO/chairman Jeffrey Barbakow and former MGM/UA board member Stephen Silbert are suing both the French parent Credit Lyonnais S.A. and its Rotterdam-based subsid Credit Lyonnais Bank Nederland. The suit was filed yesterday in Superior Court.
The suit charges that “Credit Lyonnais intentionally supplied misleading financial information (for the $ 1.3 billion merger between Pathe Communications and MGM/UA on Nov. 1, 1990) in order to protect its huge, precarious loan obligations of Pathe” and its owner Giancarlo Parretti, the Italian financier who was a client of the bank long before the deal took place.
It also charges that without the LBO/merger, Pathe wouldn’t have been able to meet large loan payments and the bank would have faced “potential loss of hundreds of millions of dollars in bad loans … and been forced to disclose the true nature and extent of their outstanding loans to Dutch and French banking authorities.”
A Credit Lyonnais spokesman said the bank has “absolutely no intention” of withdrawing its $ 500 million suit against Kerkorian and others, which was filed in L.A. Superior Court last week (Daily Variety, Dec. 8, 9, 11). “Our position is clearly stated in our complaint,” according to a CL spokesman. “Kerkorian and the other defendants conspired to defraud the bank by concealing the true financial condition of MGM, specifically that the company would have a $ 250 million cash shortfall within only 60 days after the close of the transaction. You have to ask: Who walked away with $ 1 billion?”
The CL suit says that Kerkorian made that much out of the highly publicized transaction between MGM, the Italian financier and the French bank. However, Kerkorian’s suit counters that the bank was deeply involved with Parretti and misled Kerkorian and the board into thinking that Parretti had deep, secure pockets. Patricia Glaser, an attorney for Kerkorian and the other defendants, said matter-of-factly: “The bank was Parretti’s lender, not ours: we had no relationship with the bank. The bank gave information to us about Parretti that caused us to proceed with the merger.”
Glaser said that CL provided assurances in writing about Parretti’s “sources of his money and the amounts of his money. I have a document dated Oct. 31, 1990 (from CL official Jacques Griffault) confirming where the money is coming from.” The letter said Parretti “had access to $ 967 million,” per Glaser.
Kerkorian’s suit argues the bank bailed out MGM in order to save face. It also charges that to perpetrate a “scheme of racketeering activity, CL funnels money from one banking affiliate to another, shifts loans from one ailing borrower to another, masks and distorts the health of ailing debtor companies with undisclosed and disguised loans and circumvents reporting requirements, by among other things, routing money through off-shore corporations and engaging in other sham transactions.”