An Oct. 29 Business headline incorrectly described Steven G. Schulman, the plaintiffs' attorney who questioned former Walt Disney Co. president Michael Ovitz in a court proceeding in a shareholder lawsuit, as a prosecutor. (Published 10/30/04)
Plaintiffs in a shareholder lawsuit over former Walt Disney Co. president Michael Ovitz's $140 million severance package attempted Thursday to portray Ovitz as a dishonest bumbler who botched the hiring of a major television executive and pushed the release of a movie that angered the Chinese government, damaging Disney's business prospects in the country.
The plaintiffs also suggested that Ovitz failed to inform Disney when he joined the company in 1995 that he was still earning millions of dollars from the talent management firm he founded, Creative Artists Agency (CAA).
Ovitz, finishing his second full day on the witness stand, calmly rebuffed the arguments, saying that plaintiffs attorney Steven G. Schulman was mischaracterizing events and taking things out of context.
Shareholders say Ovitz did not deserve the $140 million package, which he received after spending just 14 months on the job at Disney, because he could have been fired for incompetence, which would have negated much of the payment. They are demanding that Ovitz and other current and former Disney directors repay the company the $140 million plus about $60 million in interest.
During morning questioning, Schulman produced a document showing that Ovitz earned nearly $28 million from his former firm in 1996 while he was working at Disney, at least some of which came from former Ovitz clients who also did business with Disney, a possible conflict of interest. Schulman suggested that Ovitz never informed Disney chief executive Michael D. Eisner or other top company executives about the specifics of his deal with CAA.
"Who did you tell?" Schulman asked.
Ovitz said his deal was "common knowledge" in Hollywood.
"The entire community knew the deal that we made," Ovitz said. "Many key people at Disney knew that we were making an arrangement to keep the agency going. Michael [Eisner] knew it."
Ovitz also rejected the notion that his deal with CAA presented a possible conflict, saying he never had final authority to approve any Disney deals with his former CAA clients. Ovitz has repeatedly sought during his testimony to isolate himself from events that took place during his tenure as president by saying that other executives at the company had final say on big decisions.
He followed the same pattern on Thursday afternoon when Schulman began a line of questioning about Jamie Tarses, the young Hollywood television executive who left NBC in 1996 for a top job at ABC. Disney owns ABC. Ovitz was widely viewed at the time as the driving force behind Tarses's hiring. He said during testimony Thursday that he acted as a "facilitator" in the negotiations with Tarses but that ABC President Robert A. Iger had been ultimately in charge of the deal.
The hiring was controversial because Tarses was still under contract with NBC when she began talks with ABC. Schulman attempted to prove that Ovitz bungled the Tarses hiring in two ways: by failing to bring her on in time to help ABC develop its fall television lineup and by handling the matter in an way that was damaging to ABC's reputation.
Schulman asked Ovitz if he ever discussed with Tarses her threatening a sexual harassment suit against NBC executive Don Ohlmeyer to get out of her contract. Ovitz said Tarses told him she had a lot of "personal issues" at NBC.
"Didn't you leak to the press that Ms. Tarses was being sexually harassed by Mr. Ohlmeyer . . . in an effort to stop NBC from retaliating and to help Ms. Tarses get out of her contract earlier?" Schulman asked.
"Absolutely not," Ovitz replied, picking up the witness stand Bible. "And if you want me to swear on this again, I'd be happy to do it."
During the same line of questioning, Schulman also suggested that delays caused by the dispute over Tarses's contract in early 1996 meant Tarses could not join ABC when the network was developing its fall lineup, a critical time in the television industry.
"You're just totally off base," Ovitz responded. "You just don't understand the TV business. . . . Four or six months is just not going to change the future of a TV network," he said, referring to delays in the Tarses hiring.
Schulman sought to underline the seriousness of the Tarses matter, displaying a Feb. 23, 1996, handwritten note from General Electric Co. Chairman Jack Welch to Eisner. GE owns NBC. The note does not mention Tarses or Ovitz by name, but appears to refer to the controversy.
"This stuff on the West Coast is below you and Disney," Welch wrote. "I hope it is not a pattern . . . but if it is we are prepared to deal with it. Knowing you, I just can't believe you let him do it."
Ovitz's defense attorney, Mark Epstein, questioned the relevance of the document. Schulman suggested that it was critical because it could help show what Eisner and other Disney directors thought of Ovitz's performance, a key issue in the case. Ovitz, for his part, said Eisner showed him the note. He said he quickly called Welch to clear the air. "Jack could not have been more gracious," Ovitz said.
Schulman then questioned Ovitz about his efforts to help sign director Martin Scorsese to direct movies for Disney's film studio. The first movie Scorsese made for Disney was "Kundun," which dealt with the Dalai Lama and included material critical of the Chinese government. Schulman displayed a Disney memo in which executives at the company warned that the film would anger the Chinese. Ovitz acknowledged that the Chinese did loudly complain before the film was released.
"Were you not alarmed for the business of Disney by the reaction of the Chinese government given that one of your primary areas of responsibility was to build up the company's business in the Far East?" Schulman asked.
Ovitz responded that he was alarmed but "not panicked." He said that he called friends in China and that anger over "Kundun" quickly subsided. "It didn't do anything to hurt the Disney relationship in China," he said. "There is a [theme] park being built there right now." Ovitz is to take the stand again Friday.