Talk to any film producer today and he’ll tell you that it’s easier to raise $200 million for a new project than it is to raise $2 million. Funding for indie films is as problematic today as at any time in Hollywood’s past. In view of this, it may be instructive to flash back to that surreal moment 20 years ago when hundreds of millions of dollars suddenly flooded into the movie business — so much that producers struggled over how to spend it. Perversely, the new funding inspired not a wave of memorable films but rather one of the biz’s more memorable scandals — intrigues ending in massive lawsuits and even jail terms. Before it was over, one of the world’s biggest banks was driven to the edge of bankruptcy and MGM, traditionally the most accident-prone studio, was reduced to the status of an invalid.
(From the pages of the April 9 issue of Variety.)
The source of the money (and the trouble) was Credit Lyonnais, the state-owned French bank which, for reasons of greed and naivete, suddenly decided that filmmaking represented a delicious investment opportunity. Initially, the bank helped fund some edgy films (like the Arnold Schwarzenegger starrer “Total Recall”) but as money-hungry producers started lining up, it became clear that some of the industry’s most notorious crooks were positioned to devour the money.
Front and center was a roly-poly Italian named Giancarlo Parretti (pictured above), an ex-waiter whose principal expertise was Ponzi schemes, not film. Through a series of macho deals, Parretti secured $1.3 billion to acquire MGM, stunning even Hollywood’s most prolific hustlers. To help secure his down payment, Parretti sold MGM’s homevideo assets, which, of course, he did not as yet own.
Sarcastically dubbed “The Oracle From Orvieto,” Parretti cheerfully moved to Beverly Hills, named his daughter as his vice president of finance and brought in an actual lion (not Leo) to enliven his first press conference. Appointing Alan Ladd Jr. as his head of production, Parretti tried to mount a program of pictures, but stars and star filmmakers balked at his offers; they suspected his checks would bounce (many did). One beneficiary of Parretti’s largesse was Michael Ovitz, then chief of CAA, who engineered a $1 million-a-year consulting deal. (Checks to Ovitz didn’t bounce.)
Parretti managed to get a few films going, such as “The Russia House,” starring Sean Connery, but much of the bank’s money went to what were euphemistically called “development deals” involving young women who were neither filmmakers nor developers. Jay Kanter, who worked with Ladd at MGM at the time, recalls that Parretti was both good-humored and opaque. “If you brought up a difficult issue, he would always say, ‘It’s time for a meal,’ and he would start serving food. He never forgot that he had been a waiter.”
After less than a year, the bank started foreclosing on its loans, filing suit against Parretti and even Kirk Kerkorian, charging MGM’s former (and frequent) owner with misrepresenting the studio’s assets. Kerkorian sued back. The executive suites of Credit Lyonnais became a revolving door as France’s Socialist regime tried to limit political fallout.
One former bank executive told me of an emotional moment when he was summoned to a strategy meeting to devise ways to dump the bank’s then-$3 billion loan commitment to the movie business. “I realized that, at that precise moment, that $3 billion of wasted money could have saved the Middle East peace process,” he said. “What were we doing giving the money to Hollywood?”
Ultimately the bank turned its back on the movie business. MGM went through a serious rehabilitation under Frank Mancuso, a thoughtful and responsible executive who then brought in John Calley to revive United Artists. True to form, however, the company would later yet again become embroiled in further financial problems.
Today’s MGM is a corporate anomaly — it’s either primed for a moment of rebirth or sitting in a holding pattern, depending on who you care to believe. With profit participation in “Skyfall” and “The Hobbit,” the company is trying to fund new ventures and regain its longlost status as a major. Skeptics, however, suggest that the new management of MGM, led by Gary Barber, is still saddled with significant debt and that its future role will be limited to cautious co-financing deals.
The famously uncommunicative Barber has maintained his silence on these issues. He’s a shrewd financier from South Africa, and public silence has worked for him in the past. Given MGM’s noisily troubled legacy, it may prove prudent for this moment.