MILAN — Sitting in his Milan office, Fin.part founder Gianluigi Facchini views a collection of Napoleonic memorabilia he has amassed throughout the years.

This story first appeared in the January 26, 2004 issue of WWD. Subscribe Today.

That which once was an inspiration now offers a stark vision of how his own attempt at empire building and the subsequent decline resembled that of the famed Frenchman. Facchini dreamed of forming a multibrand luxury goods group in the spirit of LVMH Moët Hennessy Louis Vuitton and Gucci Group N.V. But at this point, his critics say the result is more like Napoleon’s failed invasion of Russia.

Over the last eight years, Fin.part snapped up labels like Cerruti, Frette, Maska, Moncler, Henry Cotton’s and shoe firm Andrea Pfister. In the process, it racked up hundreds of millions of dollars in debt, which at times eclipsed its revenue figures. Fin.part posted 2002 sales of $588 million, or 458.2 million euros at current exchange, and $417.5 million, or 325.3 million euros, in the first nine months of 2003.

“It’s really the perfect allegory of a good idea gone very wrong,” said one former Fin.part collaborator, who’s still waiting to be paid.

But even now, Facchini defends his strategy, despite clear evidence it hasn’t worked. Just as the group was trying to relaunch its portfolio of brands, the market crashed, he said. “I am not able to reexamine the pasts of other people, let alone that of myself,” he said last week on the sidelines of Cerruti’s fall-winter show. “I don’t regret what I did because it could have worked, given the market conditions of the time, but then market conditions changed.”

Twice during 2003, auditors KPMG failed to approve the company’s financial accounts. In addition, Facchini has stepped down as chairman of the company and Fin.part shares have lost nearly 70 percent of their value in the past year, with a current value of about 22 cents, or 17 euro cents, each.

The whirlwind also has propelled a revolving door of investors and managers. Ubaldo Livolsi, the well-known Italian businessman who replaced Facchini at the helm, stepped down as chairman in December after only about eight months on the job. Then, Gianni Mazzola, head of pharmaceuticals and beauty company Schiaparelli, took over as chairman.

He and his banking partner, Carlo Pagani, bought 15 percent of the company from Facchini for $16.7 million, or 13.3 million euros, making the pair the company’s single largest shareholder. Meanwhile, it looks like the two are snapping up even more shares in the company. The Web site of Italian stock market regulator Consob shows Mazzola holding a 12.9 percent stake and Pagani controlling 10.8 percent.

As the bad news from Fin.part rolled on, many in the market were eagerly awaiting Facchini’s exit. But he’s surprisingly survived, retaining his title as chief executive officer and board member status, as well as a 4.5 percent stake in the company.

Meanwhile, there are more questions than ever regarding Fin.part’s future.

While Facchini spoke briefly at the Cerruti show, both Livolsi and Mazzola have turned down interview requests. All this comes as the clock ticks for cash-strapped Fin.part to repay $251.74 million, or 200 million euros, worth of Cerruti bonds this July. Facchini said it’s now up to Mazzola and Pagani to outline a strategy for the group and determine what assets are for sale. In the meantime, he said the sportswear business did “very well” last year and Cerruti is “in line with objectives,” although he wouldn’t disclose numbers.

The latest theory to make the rounds is that Tod’s chairman and ceo Diego Della Valle, Nino Cerruti and Mazzola would team up to buy or spin off Cerruti from the rest of Fin.part. Della Valle’s spokesman denied the rumor and Cerruti and Mazzola could not be reached for further comment. Elsewhere, Istvan Francer flatly denied speculation that he may return to the label.

Equally unclear are the future intentions of The Libyan Arab Foreign Investment Co., the investment arm of Col. Muammar el-Qaddafi’s empire and Fin.part’s second-largest shareholder with 9 percent of its capital. A Lafico spokeswoman in Rome said the company doesn’t discuss its investments. Lafico has been an active investor in Italian companies, snapping up stakes in Agnelli family assets, such as carmaker Fiat and soccer team Juventus.

Meanwhile, union leaders confirm that employees’ concerns are swelling as fast as Fin.part’s share price is sinking. They said the company can’t pay its suppliers for the fabric needed to fill its orders. Some are bracing themselves for job cuts. “[Employees] have been worried for months,” said one union leader. “The Fin.part world is not a world that gives them guarantees.”

Investors’ ire also is reaching a boiling point. Marcello Gualtieri, a lawyer representing some of Fin.part’s bondholders, said he’s frustrated with management’s lack of communication and transparency. Gualtieri said he even approached Livolsi about possibly renegotiating the terms of the debt to help the company, but even those requests went unanswered.

“Facchini has lost all of his credibility,” he said.

Whether or not he has, Facchini remains the workhorse he always has been. One person who worked closely with Facchini said he leaves his house in the lakeside town of Lecco each day at 6 a.m. for an hour-long commute to Milan and stays in his office until midnight before heading home.

Despite the Fin.part ceo’s long hours, some former employees have characterized the company as a disorganized labyrinth where it is hard to discern who works in what department and who oversees different parts of the business. One ex-employee shared a tale of how he attended a company function and randomly struck up a conversation with another person. After several minutes, he realized the two men performed similar jobs for different divisions of the company but had never met or spoken to one another before. Another former collaborator noted the lack of experienced managers with a background in fashion and luxury goods.

“Mr. Facchini is not stupid at all, but he has no experience in the industry,” this person said. She claimed several high-ranking people in the company obtained and held their positions out of personal links to Facchini rather than talent.

Facchini, on the sidelines of the Cerruti men’s show, admitted that the group’s structure was not the best organized but that he started to remedy the position by firing some underperforming employees.

Another person familiar with Facchini’s character said the manager’s direct approach, at times a virtue, could make him a difficult person to work with. This person also said Facchini’s lack of industry experience made for an awkward working relationship with veteran mangers such as Silvano Storer, who shared the title of ceo with Facchini for about two years before leaving in November.

A subordinate to Facchini, Storer was actually the more seasoned professional in the fashion industry, with years of experience at groups like Marzotto and Benetton.

Fin.part began its foray into fashion in 1996 when the company bought the sportswear label Marina Yachting. Throughout the buying frenzy of the Nineties, the company snapped up a series of other brands such as Henry Cotton’s, Moncler, Maska and well-known fine linens company Frette. In 2000, it sold off its hotel division to focus on fashion and luxury goods.

Fin.part’s spree climaxed in 2000 when it bought 51 percent of Cerruti for $70 million. The following year, Fin.part purchased the remaining 49 percent from designer Nino Cerruti and his family for $67 million. Facchini and Nino Cerruti, who declined to comment for this story, reportedly clashed and wrangled for control of the company. One source questioned the financial logic behind Fin.part’s buying the second half of Cerruti, an expensive move that could be considered superfluous since Fin.part already had control of the fashion house. All in all, Fin.part paid $137 million for Cerruti, a company with consolidated sales of about $66 million in 1999.

Facchini said it was “difficult” to answer why Fin.part decided to buy the remaining 49 percent of Cerruti, stating only that “there were banks involved.”

Nino Cerruti’s departure ushered in an era of uncertainty for the brand he created. In September 2001, Fin.part appointed Roberto Menichetti as Cerruti’s designer. He resigned in March of the following year. Istvan Francer stayed at the label for only two seasons before he was replaced by Los Angeles-based designer David Cardona last April.

As if the problems at Cerruti weren’t enough, Fin.part snapped up several companies that didn’t seem to fit in with its overall strategy, such as mid-market men’s wear chain Boggi and niche shoe concern Andrea Pfister. Fin.part has since backtracked out of a desperate need for cash and sold off both of those businesses, as well as Maska and Moncler, although Fin.part still produces for the latter brand through a licensing agreement. Those operations have helped Fin.part lower its net debt to $459.2 million, or 364.8 million euros at current exchange rates, as of Sept. 30 from $672.4 million, or 534.2 million euros, a year earlier.

Fin.part hasn’t found buyers for its larger assets but Gualtieri, the corporate lawyer, alleged the situation is a dire one. Even if Fin.part were to sell Cerruti, Frette and sportswear company Pepper Industries, the most it could make would be $226.6 million to $289.5 million, or 180 million euros to 230 million euros, according to his market estimates. Not even that sum would cover all the company’s debts.

Finding buyers willing to pay top dollar is tough enough in current market conditions. But as one former Fin.part employee noted, the company has also placed itself in a weak bargaining position.

She said the company jeopardized its negotiating power back in April 2002. At an analysts’ meeting, Facchini and Storer outlined a series of scenarios in which the company could sell off various assets, namely Pepper Industries, to get back into the black. Their intent, according to this former employee, was to calm market fears about the company’s debt situation but they came out looking desperate.

“If we sell sportswear, then everything else is an opportunity, not a must,” Storer said at the meeting. “Maska is an opportunity. We can sell it or not. [Pfister] is an opportunity. We can sell it or not. Just selling three out of our four businesses puts us in a positive position with our cash flow.”

Even with its debt load, Fin.part managed to find enough change to pay its executives, according to the company’s annual report. Facchini got a salary of $2.9 million, or 2.3 million euros at current exchange rates, in 2002, plus a bonus of $251,740, or 200,000 euros, making him one of the top earning luxury goods executives in Europe. He even managed to get a bigger paycheck than Gucci president and ceo Domenico De Sole. Storer received $1 million, or 812,509 euros, for his salary, plus a bonus of $431,562, or 342,863 euros.