GEORGETOWN, United States (AFP) - Walt Disney chief executive Michael Eisner may begin testifying as early as Tuesday in defense of his 1995 decision to hire his once best friend as president of the entertainment giant, and then to fire him 15 months later with a 140 million-dollar severance deal.
The decision triggered a lawsuit in January 1997 by 17 Disney shareholders who accused the then board of directors, including Eisner and the beleaguered president, Michael Ovitz, a major Hollywood talent broker at the time, of abdicating their duty to the corporation to be fully informed about Ovitz` abilities, and the terms of his contract, both coming in and going out.
Eisner will be the ninth witness in the trial, which began on October 20 in the Delaware Chancery Court and is now projected to run into mid-December.
The lawsuit was filed in Delaware because Disney is incorporated there, as are nearly 60 percent of the Fortune 500 companies. The presiding judge in the non-jury trial is Chancellor William B. Chandler III, who is based in Georgetown, a rural community south of Wilmington.
The lawsuit is a derivative action filed on behalf of the Disney company and seeks the return to company coffers of the 140 million-dollar payout to Ovitz, 60 million dollars in interest, plus legal fees and costs.
The plaintiffs began their case with three witnesses expert in the areas of corporate governance and director duties, executive compensation, and termination law. They contended the board was uninformed and simply endorsed Eisner`s decision to hire Ovitz, and that Ovitz should have been fired for gross negligence and forced to leave empty-handed.
Instead, Eisner and Disney`s general counsel said the problems with Ovitz did not rise to the level of firing for cause, and that their only option was a no-fault termination that, by the terms of Ovitz` contract, cost the company 140 million dollars.
Their case rests on being able to prove, by cross examination of a score of then-Disney directors and executives, that the defendants breached their fiduciary duties of loyalty and care to the corporation and stockholders by not properly investigating the hiring and firing of Ovitz.
Ovitz, who as co-founder and head of Creative Artists talent agency was once dubbed by the entertainment press as "The Most Powerful Man in Hollywood," said in his five days on the witness stand last month that the five million dollars he spent on entertaining and on refurbishing his offices during his 15 months at Disney was not unusual in an industry where good relations greased the wheels of good deals.
He said deals he proposed for Disney were aborted by Eisner, and that he felt his friend of 25 years had stabbed him in the back by letting senior Disney executives bypass his authority as president to report directly to CEO Eisner instead.
When Eisner testifies, he is expected to repeat his criticism of Ovitz which, according to court documents, alleged exorbitant spending, failure to be a team player, "agenting not operating," "bad instinct," and his dislike of "being number two in a company."
11/14/2004 - 21:11 GMT - AFP