Ex-Disney President Ovitz Testifies He Should Keep Severance
May 14 (Bloomberg) -- Former Walt Disney Co. President Michael Ovitz testified that he should be able to keep his $140 million severance because he saved the company more than that by fixing projects for Chief Executive Officer Michael Eisner.
Ovtiz's remarks, contained in transcripts filed two weeks ago in state court in Wilmington, Delaware, came in a deposition for a lawsuit by shareholders to recover the money. The suit comes to trial Oct. 18. Shareholders sued Ovitz, Eisner and several directors, alleging the payment for his 1996 firing was a waste of company money.
``His testimony is designed to show that Disney got something for its money and that any severance he got was part of the bargain he made when he agreed to take the job,'' said Larry Hamermesh, a corporate law professor at Widener University who specializes in directors' duties under Delaware law.
The pretrial testimony by Ovitz and Eisner may also show the CEO and directors violated their duty to shareholders by failing to spend enough time scrutinizing the hiring and firing of the former Hollywood agent, said James , a Duke University professor of corporate law. Shareholders can seek damages from the directors if such a finding is made.
``The allegation is that Eisner was blinded by his friendship for Ovitz while the board was blinded by Eisner's conviction that Ovitz was the best person for the job,'' said of shareholder claims made in the 1997 suit.
Ovitz, 57, who represented actors such as Tom Cruise and Kevin Costner, testified Nov. 8, 2003, that he considered Eisner to be ``my best friend'' at the time of his 1995 hiring. After Ovitz took the job, Eisner, 62, ``betrayed'' him by undercutting him and taking steps to fire him before the one-year honeymoon he had asked for to learn the job, Ovitz testified.
No Shot
Eisner ``didn't even give me a shot when I warned him upfront that there had to be an educational curve,'' Ovitz said.
Disney spokesman John Spelich declined to comment on Ovitz's testimony. Ovitz didn't return calls for comment.
``The Disney board of directors acted diligently and responsibly in deciding to hire Michael Ovitz and in handling his termination,'' said Michael McKeon, spokesman for Eisner and all directors who were sued except Roy Disney and Stanley Gold.
Former directors Disney and Gold resigned from the board last year to wage a campaign to oust Eisner. At the last annual meeting held by Disney, the second-largest U.S. media company, 45 percent of the shares voted did not support Eisner's re-election to the board.
A Mistake
In a letter presented as evidence in the shareholder case, Eisner called Ovitz's hiring a ``mistake.''
``His choice was ill founded, unfortunately,'' Eisner said in an October 1996 letter to board members Irwin Russell and Raymond Watson. ``The mistake was mine, totally and completely.''
Eisner testified that he had grown disenchanted with Ovitz because his style had alienated other executives.
``Michael does not have the trust of anybody,'' Eisner wrote. ``I do not trust him. None of the people he works with feel comfortable with his directness and honesty.''
Ovitz testified Eisner undercut him from the day he joined Disney. In his first meeting with Eisner's chief lieutenants, then- Chief Financial Officer Stephen Bollenbach and General Counsel Sanford Litvack, Ovitz learned that neither would report to him as they had to his predecessor, Ovitz testified.
``They refused to report to me, and Michael Eisner refused to make them,'' Ovitz testified.
Ovitz testified that Eisner started a list of his failings as president before his yearlong honeymoon period ended. Eisner, for example, was critical of what he saw as Ovitz's failure to expand Hollywood Records, a Disney music unit.
Ovitz Trusted Eisner
``I trusted Michael Eisner 1,010 percent,'' Ovitz testified. ``I had no idea that he had a paper trail the size that he did about me.''
Ovitz said under questioning that his accomplishments as Disney's president included ironing out problems on the company's ``Home Improvement'' television sitcom. Actor Tim Allen, the show's star, had walked off the set because of creative conflicts. Eisner asked Ovitz to use his skills as an agent to bring Allen back, one of several projects he was asked to fix, Ovitz testified.
Ovitz hosted a dinner party at his house for Allen and gave him a $4,000 print of a painting by artist Roy Lichtenstein, he testified.
Tim Allen
``I got Tim Allen back to work,'' Ovitz testified, adding that he had protected a $250 million asset, about twice the size of his severance. ``He never missed another episode.''
Eventually, Eisner and Litvack put pressure on him to resign and forgo the severance provisions under his employment contract, Ovitz testified.
Ovitz refused to leave at first, saying he vowed to work harder to learn the job and build better relationships with his colleagues. During one meeting, Litvack came into Ovitz's office and told him that he was fired, Ovitz recalled in testimony.
``I said, `Sandy, you are going to have to pull me out of here,'' Ovitz testified. `I'm not leaving.' He said, `Well, you are not to be here,' and a number of other things. They were very hurtful to me.''
Litvack, now a lawyer in Los Angeles, declined to comment.
By December 1996, Ovitz said he agreed to step down as president if Disney officials honored his employment agreement.
``I made a deal with the Walt Disney Co., and I stood by that deal and I expected them to stand by that deal,'' Ovitz testified. ``The furthest thing from my mind was this contract, which I don't even think I read except one time when I signed it because I had Mr. Eisner's word.''
The case is In Re the Walt Disney Co., No. C.A. 15452, Court of Chancery, Wilmington, Delaware.
May 14 (Bloomberg) -- Former Walt Disney Co. President Michael Ovitz testified that he should be able to keep his $140 million severance because he saved the company more than that by fixing projects for Chief Executive Officer Michael Eisner.
Ovtiz's remarks, contained in transcripts filed two weeks ago in state court in Wilmington, Delaware, came in a deposition for a lawsuit by shareholders to recover the money. The suit comes to trial Oct. 18. Shareholders sued Ovitz, Eisner and several directors, alleging the payment for his 1996 firing was a waste of company money.
``His testimony is designed to show that Disney got something for its money and that any severance he got was part of the bargain he made when he agreed to take the job,'' said Larry Hamermesh, a corporate law professor at Widener University who specializes in directors' duties under Delaware law.
The pretrial testimony by Ovitz and Eisner may also show the CEO and directors violated their duty to shareholders by failing to spend enough time scrutinizing the hiring and firing of the former Hollywood agent, said James , a Duke University professor of corporate law. Shareholders can seek damages from the directors if such a finding is made.
``The allegation is that Eisner was blinded by his friendship for Ovitz while the board was blinded by Eisner's conviction that Ovitz was the best person for the job,'' said of shareholder claims made in the 1997 suit.
Ovitz, 57, who represented actors such as Tom Cruise and Kevin Costner, testified Nov. 8, 2003, that he considered Eisner to be ``my best friend'' at the time of his 1995 hiring. After Ovitz took the job, Eisner, 62, ``betrayed'' him by undercutting him and taking steps to fire him before the one-year honeymoon he had asked for to learn the job, Ovitz testified.
No Shot
Eisner ``didn't even give me a shot when I warned him upfront that there had to be an educational curve,'' Ovitz said.
Disney spokesman John Spelich declined to comment on Ovitz's testimony. Ovitz didn't return calls for comment.
``The Disney board of directors acted diligently and responsibly in deciding to hire Michael Ovitz and in handling his termination,'' said Michael McKeon, spokesman for Eisner and all directors who were sued except Roy Disney and Stanley Gold.
Former directors Disney and Gold resigned from the board last year to wage a campaign to oust Eisner. At the last annual meeting held by Disney, the second-largest U.S. media company, 45 percent of the shares voted did not support Eisner's re-election to the board.
A Mistake
In a letter presented as evidence in the shareholder case, Eisner called Ovitz's hiring a ``mistake.''
``His choice was ill founded, unfortunately,'' Eisner said in an October 1996 letter to board members Irwin Russell and Raymond Watson. ``The mistake was mine, totally and completely.''
Eisner testified that he had grown disenchanted with Ovitz because his style had alienated other executives.
``Michael does not have the trust of anybody,'' Eisner wrote. ``I do not trust him. None of the people he works with feel comfortable with his directness and honesty.''
Ovitz testified Eisner undercut him from the day he joined Disney. In his first meeting with Eisner's chief lieutenants, then- Chief Financial Officer Stephen Bollenbach and General Counsel Sanford Litvack, Ovitz learned that neither would report to him as they had to his predecessor, Ovitz testified.
``They refused to report to me, and Michael Eisner refused to make them,'' Ovitz testified.
Ovitz testified that Eisner started a list of his failings as president before his yearlong honeymoon period ended. Eisner, for example, was critical of what he saw as Ovitz's failure to expand Hollywood Records, a Disney music unit.
Ovitz Trusted Eisner
``I trusted Michael Eisner 1,010 percent,'' Ovitz testified. ``I had no idea that he had a paper trail the size that he did about me.''
Ovitz said under questioning that his accomplishments as Disney's president included ironing out problems on the company's ``Home Improvement'' television sitcom. Actor Tim Allen, the show's star, had walked off the set because of creative conflicts. Eisner asked Ovitz to use his skills as an agent to bring Allen back, one of several projects he was asked to fix, Ovitz testified.
Ovitz hosted a dinner party at his house for Allen and gave him a $4,000 print of a painting by artist Roy Lichtenstein, he testified.
Tim Allen
``I got Tim Allen back to work,'' Ovitz testified, adding that he had protected a $250 million asset, about twice the size of his severance. ``He never missed another episode.''
Eventually, Eisner and Litvack put pressure on him to resign and forgo the severance provisions under his employment contract, Ovitz testified.
Ovitz refused to leave at first, saying he vowed to work harder to learn the job and build better relationships with his colleagues. During one meeting, Litvack came into Ovitz's office and told him that he was fired, Ovitz recalled in testimony.
``I said, `Sandy, you are going to have to pull me out of here,'' Ovitz testified. `I'm not leaving.' He said, `Well, you are not to be here,' and a number of other things. They were very hurtful to me.''
Litvack, now a lawyer in Los Angeles, declined to comment.
By December 1996, Ovitz said he agreed to step down as president if Disney officials honored his employment agreement.
``I made a deal with the Walt Disney Co., and I stood by that deal and I expected them to stand by that deal,'' Ovitz testified. ``The furthest thing from my mind was this contract, which I don't even think I read except one time when I signed it because I had Mr. Eisner's word.''
The case is In Re the Walt Disney Co., No. C.A. 15452, Court of Chancery, Wilmington, Delaware.