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CREDIT LYONNAIS SUED FOR RICO VIOLATIONS, FRAUD AND CONSPIRACY; $675 MILLION IN DAMAGES SOUGHT

 LOS ANGELES, Dec. 17 /PRNewswire/ -- A lawsuit seeking $675 million, plus punitive damages was filed today in California Superior Court by Tracinda Corp., Kirk Kerkorian, Jeffrey Barbakow and Stephen Silbert against Credit Lyonnais S.A. and Credit Lyonnais Bank Nederland for violations of the Racketeering and Corrupt Organizations Act (RICO), fraud and conspiracy.
 The suit says, "Credit Lyonnais intentionally supplied misleading financial information (for the merger between Pathe Communications and MGM/UA in 1990) ... in order to protect its huge, precarious loan obligations of Pathe and other companies affiliated with Giancarlo Parretti, the Italian financier and long-time client of Credit Lyonnais.
 "Without this merger, Pathe and its affiliates which also borrowed from Credit Lyonnais would have been unable to meet their loan commitments, causing their demise. From this, disastrous consequences would have befallen Credit Lyonnais. Not only would Credit Lyonnais have faced a potential loss of hundreds of millions of dollars in bad loans, but Credit Lyonnais banking entities might then be forced to disclose the true nature and extent of their outstanding loans to Dutch and French banking authorities."
 It continues, "Following the merger, however, Parretti, Pathe and CLBN (Credit Lyonnais) immediately, unexpectedly, and contrary to their representations to MGM-Pathe, Tracinda and HLHZ (Houlihan, Lokey Howard & Zukin -- the firm hired to provide the solvency opinion to MGM/UA at the time of the closing of its merger with Pathe), systematically depleted the assets and cash of MGM/UA, denied credit where credit had been promised, improperly transferred monies properly owing to MGM-Pathe, in order to cover debts of affiliates of Pathe and Parretti, mismanaged MGM and, generally, ran a healthy, credit-worthy studio into the ground. These acts included, without limitation, the following:
 (a) CLBN unlawfully diverted $50 million from Warner Home Video Inc. and affiliates, properly intended for MGM-Pathe, to pay off unrelated obligations;
 (b) CLBN refused to extend to MGM-Pathe a certain production financing credit line in excess of $125 million that CLBN previously had committed in writing to extend;
 (c) CLBN refused to factor certain MGM-Pathe receivables after advising HLHZ, before the merger, that it would do so;
 (d) CLBN loaned certain monies to MGM-Pathe but repayments by MGM-Pathe were credited to Pathe's loan obligations; and
 (e) Equity infusions (confirmed orally and in writing by Pathe and CLBN at the time of the merger) in an amount in excess of $570 million, have been subsequently treated, in whole or in substantial part, as debt by CLBN."
 The lawsuit states that this action "arises from a long-standing and far-reaching fraudulent scheme conceived and executed by the Credit Lyonnais 'family' of financial institutions to conceal improper and unlawful banking practices from their regulators and to defraud the creditors, shareholders and related entities and business associates of their client borrowers.
 "To perpetrate this scheme of racketeering activity, Credit Lyonnais 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," the suit says.
 "Credit Lyonnais S.A. and its subsidiary Credit Lyonnais Bank Nederland N.V. have played this shell game by building a complex, interdependent network of lenders and borrowers for the purpose of protecting and disguising its lending activities. When one problem debtor becomes too much of a liability, Credit Lyonnais works to create the impression that a new entity has appeared to rescue the old, defaulting borrower from financial ruin. In reality, Credit Lyonnais simply engineers the transfer of the debt from the books of the old borrower to a new one. But as the problem loans mount, Credit Lyonnais must necessarily add new companies to the pyramid to satisfy or disguise the ever-increasing bad debt burden. Due to its fragile structure, Credit Lyonnais knows that the failure of any one company within the network will topple the entire inter-connected house of cards."
 In the Pathe-MGM/UA transaction, the suit says, "rather than risk having the merger scuttled and causing a collapse of its far-flung scheme, Credit Lyonnais falsely misrepresented Pathe's ability to finance the merger. Based on these misrepresentations and other unlawful activities, the merger eventually closed and cross- complainants and the other shareholders of MGM/UA sold their shares of MGM/UA stock and relinquished control of the company."
 According to the suit, conditions for closing the merger included MGM/UA requiring Pathe to verify its sources and uses of financing and provide a solvency opinion for MGM/UA as of the closing date.
 "Had Credit Lyonnais not lied, the conditions required for the merger to close would not have occurred," the suit says. "If Pathe did not perform as promised and the merger did not close, Pathe would lose, at least $350 million in cash, a $75 million security interest previously granted by Pathe to MGM/UA and would be subject to additional damages through claims by MGM/UA and its shareholders."
 MGM/UA shareholders would have retained the $250 million already distributed to them and ownership of the company, free of bank debt and with substantial cash on hand.
 "In sum," the suit says, "but for the misrepresentations of CLBN to both HLHZ and cross-complainants, Pathe would not have acquired MGM/UA."
 The suit continues, "Immediately after the merger occurred, Credit Lyonnais began to loot the newly-merged entity. It gutted the company, diverting much needed cash from its operations and causing it to incur significant additional debt, all to save its own financial empire by paying off previously undisclosed monies owed to Credit Lyonnais by Pathe, Parretti and their affiliated entities. In short, Credit Lyonnais saved itself at the expense of everyone else."
 According to the suit, "when Pathe approached MGM/UA to discuss the idea of a purchase, CLBN vouched entirely for Parretti's character and ability. CLBN even provided Parretti with a letter of introduction to that effect. What cross-complainants didn't know was what lurked behind the public persona of both CL, CLBN and Parretti."
 The suit goes on to say, "Cross-complainants have been and will continue to be injured in their business and property by reason of these violations. In addition, cross-complainants have had their individual business operations disrupted by these unlawful courses of conduct, have been forced to spend significant time, effort and capital defending against claims of third parties and have suffered and will continue to suffer other injury to their business and property, the full nature and extent of which cannot presently be ascertained.
 -0- 12/17/92
 /CONTACT: Michael Sitrick or Michael Kolbenschlag of Sitrick and Company, 310-788-2850/


CO: Credit Lyonnais S.A.; Credit Lyonnais Bank Nederland;
 Tracinda Corp. ST: California IN: ENT SU:


TM -- LA041 -- 7979 12/17/92 19:36 EST
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Date:Dec 17, 1992
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