For Ovitz and Eisner, a dirty-laundry fest

By Claudia Eller and Richard Verrier
Los Angeles Times

The mud-slinging in a Delaware courtroom came to a close Wednesday, and neither of the two men at the center of the case — Michael Eisner and Michael Ovitz — got away clean.

Eisner

Ovitz

For Eisner, now in his waning months as Disney's chief executive, a strong performance could have restored some luster to a legacy tarnished by a 45 percent no-confidence vote for his re-election to the board last year.

For former talent agent Ovitz, who was fired after 15 months as Disney's president, the trial offered a chance to rebut volumes of press clippings that he said had turned him into a caricature of a Hollywood power monger, ruining his reputation in an industry to which he wants to return.

But with the close of testimony Wednesday, observers say neither man can claim victory — at least in the court of public opinion.

As veteran talent manager Bernie Brillstein put it: "It was a no-win, no-win."

For the past three months, lawyers for the shareholders have tried to prove that Eisner and the company's board acted improperly in paying a severance to Ovitz estimated at $140 million. They argued that Ovitz should have been dumped without a dime because his conduct amounted to either gross negligence or malfeasance.

The defendants countered that although the much-heralded hiring of Ovitz backfired, there were no legal grounds for denying him his negotiated severance package.

Now the matter rests with the presiding judge, whose ruling is not expected for several months.

In a statement Wednesday, Ovitz said: "I never really viewed the trial as any type of reputational battle. I simply wanted the real facts to come out — under oath — and speak for themselves. And I believe they did in this case. Now, I'm looking forward to putting this behind me and moving on. There are a lot of exciting things I still intend to do."

Eisner's attorney, Gary Naftalis, said the evidence at the trial simply reaffirmed his client's "reputation as a CEO who cared deeply about the Disney Co. and whose actions were guided always by a steadfast commitment to serve the best interests of Disney shareholders and to insist that the highest ethical standards be met."

A decision against the Disney directors would, of course, be damaging to the images and interests of both Eisner and Ovitz. But even a ruling for the defense cannot erase the unflattering portraits of the two executives' styles and temperaments that emerged during testimony.

Eisner's failings were especially striking. He had championed his friend's hiring and, as CEO, had a responsibility to make sure Ovitz's transition from freewheeling Hollywood agent to corporate president went smoothly.

Instead, Eisner created a messy chain of command that may have doomed his No. 2 executive even before his first day at the office. When two of the company's top executives — its chief financial officer and general counsel — said they did not want to report to the new guy, Eisner didn't stand up for him.

"There was no clear statement by Eisner to establish a pecking order," said Patrick McGurn, executive vice president of Institutional Shareholder Services, which advised clients last year to withhold votes for Eisner's re-election to the board. "He just allowed Ovitz to twist in the wind."

Perhaps most damaging for Eisner was his admission that he was not "completely candid" on CNN's "Larry King Live" when he said there were no problems between him and Ovitz at Disney. Telling the truth, Eisner suggested, may have undermined his efforts to try to unload Ovitz on Sony Corp.

In the trial, Eisner was forced to confront memos he had written about Ovitz in which he portrayed his underling as an untrustworthy "psychopath" who lavishly spent company funds.

The plaintiffs said the missives proved Ovitz could have been denied his rich payout. But on the stand, Eisner said his writings were filled with "hyperbole."