Lawsuit to air Disney's dirty laundry
By Gary Gentile
Associated Press
LOS ANGELES — As The Walt Disney Co. plans for a future without iconic CEO Michael Eisner, a lawsuit filed by disgruntled shareholders is forcing Disney to relive one of his most embarrassing mistakes, hiring Michael Ovitz as president.
The suit filed in 1997 is finally going to trial and will feature some of Hollywood's biggest egos, including Eisner and Ovitz, the famed talent agent whose tumultuous reign at Disney ended after just 14 months. It is also expected to reveal some of the less-than-savory dealings at Disney during one of the company's most difficult periods.
Shareholders are objecting to Ovitz's severance package, valued at about $140 million. The lawsuit charges that Disney's board at the time was negligent in not consulting an expert before approving Ovitz's contract and that Eisner let Ovitz collect the money to avoid personal embarrassment.
The trial is set to begin Oct. 18 in Delaware, where, like so many companies, Disney is incorporated. Although Eisner and then-board members including Ovitz are defendants, shareholders brought the suit on behalf of the company, which would benefit from any judgment.
When Ovitz was hired in 1995, Disney had just become a media giant with the purchase of Capital Cities/ABC but was still reeling from the death of its president, Frank Wells, the previous year.
Ovitz claims he was doomed from the start: micromanaged by Eisner, undermined by key executives and forced to leave before he had time to prove his worth.
Eisner and the company contended that Ovitz was a lavish spender whose arrogance alienated executives and who ultimately could not be trusted.
Ovitz recently succeeded in dismissing part of the case against him, but must still defend his role in approving his severance package.
"The evidence is going to show that the board had no grounds to terminate Michael Ovitz for cause and that he had every right to obtain the benefits of his employment contract," Mark Epstein, Ovitz's attorney, said.
Mike McKeon, a spokesman for Eisner and other board members, said lawyers were not available for comment.
Depositions that shareholders' lawyers took of key players including Eisner and Ovitz paint a colorful picture of their relationship.
Eisner, who recently said he will retire in 2006, said he had been pursuing Ovitz for years and believed the glitzy superagent, once known as "the most powerful man in Hollywood," could ultimately succeed him as CEO.
Ovitz had co-founded Creative Artists Agency, one of the biggest and most powerful talent agencies. He had represented stars including Robert Redford, Barbra Streisand, Paul Newman and Al Pacino. He also was an accomplished dealmaker who brokered the sale of MCA/Universal to Japanese electronics firm Matsushita in the early 1990s.
Pretrial testimony shows there was acrimony from the very beginning of the Disney-Ovitz relationship.
At a Sunday lunch at Eisner's home just days before the hiring was announced, Eisner let two of his key executives personally challenge the man he had courted.
Eisner didn't support his new hire, recalling, "I let it happen." Ovitz took the job anyhow but soon clashed with Eisner over which jobs he would handle.
Another persistent issue was Ovitz's spending, which included millions of dollars on office renovations and expensive gifts and parties reminiscent of his days at his privately owned talent agency.
