Lawsuit Drives Rift Among Agnellis
Fiat Patriarch’s Daughter Wants Fresh Accounting of His Estate
Stacy Meichtry
November 18, 2009
The Wall Street Journal
http://online.wsj.com/article/SB10001424052748703811604574533721016931970.html
ROME — Nearly seven years after the death of Gianni Agnelli, a dispute over the Fiat patriarch’s estate has sparked tensions and riveted the nation that once considered him its unofficial king.

Last week, lawyers began to present closing arguments in a civil trial pitting Mr. Agnelli’s daughter, Margherita Agnelli de Pahlen, 54 years old, against three of her father’s closest advisers.

In the lawsuit, Mrs. Agnelli de Pahlen asks for a fuller accounting of her father’s estate, which has an estimated value of between $3 billion and $5 billion. She alleges that the advisers didn’t provide a full accounting. In court, her lawyers alleged that money and assets totaling more than one billion euros ($1.5 billion) remained unaccounted for when her father died in 2003, scattered in different bank accounts and investment companies outside Italy.

Relations between John Elkann, her son and handpicked successor to Mr. Agnelli, have been severely strained by the suit, a person familiar with the situation says.

So far, the trial has remained closed to the public since it began in early 2008, and a judge isn’t expected to reach a ruling until next year. Any ruling is likely to face a lengthy appeals process, which could drag out the affair for years.

The proceedings have nonetheless left the family exposed to levels of public scrutiny that would once have been unthinkable. At the height of its power in the 1960s and ’70s, the Agnelli family was the very definition of elegance and style—remaining above the fray even as Mr. Agnelli pulled the strings of Italy’s political, media and banking worlds.

Some say the dispute has knocked the Agnelli name from its pedestal. “It’s a demonstration the dynasty is finished,” said Giorgio Airaudo, a union official for Fiat plant workers. “In the past, you wouldn’t even have known about these problems. They would have been resolved behind the scenes.”

In August, Italian tax authorities in Rome announced that Mrs. Agnelli de Pahlen’s allegations had prompted them to open an investigation into the Agnelli estate.

As the probe and the trial continue, newspapers have brimmed with reports itemizing Agnelli assets, including yachts, palazzos and the family dogs. The cover of Il Mondo, a business newsweekly, recently featured a black-and-white photo from 1960 of a shirtless Gianni Agnelli frolicking with a bikini-clad woman at the beach.

“I’m indignant—and I’m not alone—over how things have been manipulated and for the violent words and falsehoods directed at my grandfather Gianni Agnelli,” Mr. Elkann told reporters after the tax authorities’ investigation was announced. Mr. Elkann, through a spokesman, declined to comment on the tax probe for this article.

The three advisers named in Mrs. Agnelli de Pahlen’s lawsuit—Gianluigi Gabetti, Franzo Grande Stevens and Siegfried Maron—say they only looked after Mr. Agnelli’s business interests and know nothing of alleged missing sums referred to in the lawsuit, according to Carlo Pavesio, a lawyer for Mr. Gabetti. A lawyer for Mr. Grande Stevens didn’t respond to requests to comment. A spokesman for Exor SpA, the Agnelli holding company, declined to comment, as did a lawyer for Mrs. Agnelli de Pahlen.

Mr. Elkann, 33, appointed deputy chairman of Fiat SpA in 2004, has fashioned himself as the face of a new Agnelli generation that aims to keep its business affairs separate from family matters. Unlike his jet-setting grandfather, Mr. Elkann is soft-spoken, measures his words in public and doesn’t seek the limelight.

Under the leadership of Mr. Elkann—who was born in New York and raised in the U.K., France, Brazil and Italy—the family has consolidated a chain of holding companies it once used to control Fiat, the engine of the Agnelli fortune, into a single investment company—Exor.

Mr. Elkann has also given Fiat Chief Executive Sergio Marchionne the latitude to make a daring push into the U.S. auto market with his overhaul of Detroit auto maker Chrysler.

“This is a completely new phase for the family,” Sergio Chiamparino, the mayor of Turin, said in an interview. Mr. Chiamparino says the media coverage has been overblown. The Agnelli trial “is not what people talk about at the bar. What you hear is talk of how Marchionne is in Detroit and how this will bring us jobs.”

Analysts say the trial is pulling at the very seams of Mr. Elkann’s attempt to give the family business a corporate makeover. For starters, the plaintiff is his mother, and Mrs. Agnelli de Pahlen’s allegations have left Mr. Elkann, who isn’t named in the suit, caught in the middle. Messrs. Gabetti and Grande Stevens are members of Exor’s board and continue to advise Mr. Elkann, Exor’s chairman.

An Exor spokesman said the trial won’t have any repercussions on the Agnelli family holding company.

When Gianni Agnelli, grandson of the Fiat founder of the same name, took the reins of Fiat in the 1960s, Italy was in the midst of a postwar boom known as the “economic miracle” that helped to make Fiat and Turin industrial powerhouses.

Known in Italy as the avvocato, or lawyer, Mr. Agnelli channeled his wealth into an iconic lifestyle, amassing an extensive art collection, yachts and villas in Corsica and the Alps. He married a noblewoman, Marella Caracciolo di Castagneto, and served in Italy’s Senate as a so-called senator for life.

Mr. Agnelli maintained an ironclad grip on Fiat management, expanding into foreign markets and opening factories in South America. His dual role as the company’s top manager and controlling shareholder, however, led to complex ownership structures as Mr. Agnelli sought ways to maintain control of Fiat without stretching the family’s finances too thinly. By the time of his death, the Agnelli family controlled Fiat through a chain of three separate holding companies.

“The strong presence of the family owners mixed and confused the lines between shareholder and management,” says Giuseppe Berta, a professor of industrial history at Milan’s Bocconi University who formerly managed Fiat’s historic archives.

In his later years, however, Mr. Agnelli faced the delicate task of handing over the reins of the family empire. Mr. Agnelli’s first-born son, Edoardo, had battled drug abuse and wasn’t in the running to succeed his father. In 2000, Edoardo was found dead beneath a highway overpass near Turin.

Mr. Agnelli’s nephew, Giovanni Alberto Agnelli, who was in line to take the reins, died of stomach cancer at the age of 33 in 1997. Weeks after Giovanni’s death, Mr. Agnelli publicly anointed Mr. Elkann, then 21, to follow in his footsteps. Mr. Elkann, the son of Mrs. Agnelli de Pahlen and the French writer Alain Elkann, had spent his summer breaks from college working incognito at car-assembly plants. Now he was briskly appointed to Fiat’s board.

“Elkann has been commanded to join the board just like my grandfather commanded me,” Mr. Agnelli told a Fiat shareholder meeting in June 1998, noting that he was 22 when he joined auto maker’s management.

Upon Mr. Agnelli’s death in 2003, the intricate process of dividing up his estate and securing the passage of power to Mr. Elkann fell to his trusted advisers, Messrs. Grande Stevens, Gabetti and Maron. Mr. Agnelli’s wife gave her shares to Mr. Elkann, securing his control of the family empire. She also divided up Mr. Agnelli’s personal assets with her daughter, Mrs. Agnelli de Pahlen. In 2004, Mrs. Agnelli de Pahlen issued a statement saying she was satisfied with the handling of the inheritance. In 2007, however, she filed a lawsuit seeking a fuller accounting of the estate.

When Mr. Elkann gave a talk to a group of students in Turin late last month, one teacher asked him how he was handling the trial. “This issue is already very public, and I don’t won’t add another word,” Mr. Elkann said, adding: “It pains me.”

—Margherita Stancati contributed to this article.