The 20-year inheritance feud dividing the Fiat dynasty

Five years ago, members of Italy’s most celebrated business dynasty gathered at a grand 18th-century villa outside Turin following the funeral of Marella Agnelli, widow of the great 20th-century industrialist Gianni Agnelli.

But rather than
a sombre reunion, the event proved the latest flashpoint in a feud that has split the family as the late couple’s only surviving child Margherita clashed with her son John Elkann over her father’s multibillion-euro estate. They have not seen each other since, according to several relatives.

The schism was thrust back into the spotlight last month when authorities raided the home and offices of Elkann, head of the family business and chair of carmaker Stellantis, following a complaint by his mother that he had helped her mother evade Italian tax.

“Margherita Agnelli has been persecuting her three eldest children and her parents in the courts for over 20 years,” lawyers for Elkann said after the raids.

A fight over the legacy of Gianni Agnelli

The 20-year dispute has pitted Margherita against her three eldest children in a fight the 68-year-old says she is pursuing for the sake of the five children she had by her second husband.

Billions of euros in assets are in contention including Monet and Picasso artworks and a stake in Dicembre, the ultimate parent of listed conglomerate Exor, the value of whose holdings have grown 2,700 per cent to €33b (NZ$58.6b) under Elkann since his grandfather’s death more than two decades ago.

As well as Fiat, the carmaker Gianni Agnelli built into one of the biggest in the world and which is now part of global car group Stellantis, Exor holds major stakes in businesses from luxury car manufacturer Ferrari and Juventus Football Club to Dutch medical equipment maker Philips and news magazine The Economist.

“At stake is ownership of Dicembre and therefore of Exor … if Margherita were to emerge victorious in her [multiple] claims there would be a redistribution of Dicembre’s ownership stakes and Elkann would lose the majority,” said Mauro Orlandi, professor of private law at Luiss University in Rome.

When Gianni Agnelli died in 2003, his widow and daughter each inherited a 37.5 per cent stake in Dicembre as well as assets worth hundreds of millions of euros, from art to property in Italy and overseas. Elkann, his grandfather’s anointed successor, had already been gifted 25 per cent of the company.

The following year, when debt-laden Fiat’s survival was in doubt, Margherita decided she wanted out of the family business and agreed to a €1.2b payout in exchange for transferring her stake in Dicembre to her mother and relinquishing any rights over her estate.

After that settlement, made under Swiss law as Marella and Margherita each lived in Switzerland at the time, the grandmother sold part of Dicembre to Elkann’s younger siblings Lapo and Ginevra, who now each own 20 per cent, and sold the rest of her holding to John over the years.

Margherita’s change of heart

But soon after the agreement Margherita had a change of heart — prompted, she said, by the discovery that her father’s estate included hundreds of millions of euros that had been hidden abroad, a share of which she claimed she was entitled to. In 2010 she lost a legal challenge to the 2004 agreement — but that did not stop the family feud from rumbling on.

Under the settlement, Margherita also had to pay an annuity to her mother. She now claims that her mother did not pay income tax on this annuity in 2018 or 2019, arguing that she should have done so under the laws of Italy, where she insists Marella spent most of her time in the last years of her life so did not qualify for Swiss residency.

A spokesperson for Margherita told the Financial Times that she had always sought simply to defend the interests of her five children by her second husband Serge de Pahlen — and to “respect her father’s will as he had only donated 25 per cent of Dicembre to John Elkann, leaving the rest to Margherita and widow Marella Caracciolo”.

Elkann’s lawyers say Margherita cashed out in 2004 “at a time when the future of her family’s and her son’s business interests were uncertain”, and that she later changed her mind after his turnaround of Fiat, hoping to profit from the family’s additional wealth.

Margherita’s lawyers reject this, saying she had been “provoked” by her three eldest children, referring to an ongoing lawsuit brought by Marella in Switzerland in 2015 and taken over by John the following year to confirm the validity of the 2004 inheritance settlement.

Lapo and Ginevra Elkann joined the case after their grandmother’s death. Further cases continue in Switzerland over Marella’s estate.

“It is a fact that the Elkanns initiated a case against their mother [in Switzerland] even before their grandmother’s will was published,” the lawyer said.

Margherita’s cousin Lupo Rattazzi said he believed there was “seller’s remorse” in Margherita’s conduct.

“I remember her telling me [Fiat] was going to end up like Parmalat,” he told the FT, referring to the Italian food group that collapsed in 2003. “If it weren’t for the enormous increase in the value of her stake [in Dicembre] after she sold, she would not have reneged on the settlement.”

Rich rewards

John Elkann now owns 60 per cent of Dicembre, which ultimately controls Exor. The largest shareholder in Stellantis, Exor is set to reap about €700m in dividends after the carmaking group last month reported record annual profits of €18.6b.

Assets owned by Exor, formerly known as IFIL, have increased to about €33b from about €1.2b when Elkann’s grandfather died.

Family members had hoped the differences could be worked out, with Ginevra Elkann acting as interlocutor between her grandmother, mother and brothers. But those hopes vanished at the funeral reception for Marella, where Margherita and John had yet another row, according to several guests.

A key point of contention now is where Marella lived in her latter years. Margherita’s legal team has argued that she resided in Italy so her will should have been regulated by Italian law, under which children are always entitled to a portion of a parent’s estate.

Lawyers for the three Elkann siblings have argued in court that Margherita gave up her right to any further inheritance claim when she signed the 2004 agreement.

“In 2004, Mrs de Pahlen freely decided to sell her shares [in Dicembre], a transaction that cannot be reversed now,” a spokesperson for the Elkanns told the Financial Times.

But Margherita’s lawyers disagree. In lawsuits in Italy and Switzerland, she is challenging the validity of her mother’s will, drawn up in Switzerland in 2011, from which she was excluded based on the 2004 agreement.

Four of the five de Pahlen children have joined their mother in cases disputing their grandmother’s will. In one case, which has been going on for four years, Margherita is also challenging whether Switzerland should have jurisdiction over her mother’s estate.

According to several independent legal experts, if the tax fraud complaint that triggered this month’s raids is successful and prosecutors conclude Marella was living in Italy before she died, and not Switzerland as she claimed, it could help Margherita’s legal team argue that Italian law should govern the dispute over her mother’s will.

But the spokesperson for the Elkanns said there was “no scenario under which control and ownership of Dicembre can be altered by Mrs de Pahlen’s manoeuvres”.

Family schism

The dispute has split Margherita’s children. Lapo and Ginevra have sided with their brother John and have cut off contact with their mother and half-siblings, according to friends and family.

People close to both sides of the family say the relationship between Margherita, an artist who has never worked in the family business, and her three children from her marriage to Alain Elkann has been “fraught” since their early years.

Some members of the extended family who did not wish to be named argue that Margherita’s sense of aggrievement is justified, alleging that some assets were hidden from her in relation to the 2004 agreement and others, including paintings worth hundreds of millions of euros, had disappeared since Marella’s death.

“Margherita’s father left her paintings that were kept by her mother until her death [by legal agreement] but some of these artworks have gone missing,” her spokesperson said.

However, the spokesperson for the Elkanns said “there are categorically no missing paintings, these artworks were the personal property of Marella Caracciolo Agnelli and at her passing they were all fully accounted for in her estate by the Swiss court-appointed administrator”, adding that Margherita seemed “determined to inflict emotional pain on her three eldest children”.

With seven legal cases under way that will take years to conclude, friends and relatives say the chances of a settlement are slim and the family is “unlikely to find peace” soon.

Written by: Silvia Sciorilli Borrelli

© Financial Times