Bren Says He Just ‘Went Along’ on Several Key Issues

Irvine Co. Chairman Donald L. Bren testified Tuesday that while he was extremely dissatisfied with the performance of former company president Peter Kremer, he repeatedly voted to give Kremer salary increases and hefty bonuses.

Bren also said that even though he frequently disagreed with Irvine Co. board decisions before he acquired control of the company in 1983, he routinely voted with the majority for the sake of harmony.

Bren is locked in a court battle with heiress Joan Irvine Smith over the amount of money that Smith and her mother, Athalie Clark, should receive for the 11% stake they held in the company before Bren acquired a controlling interest in a November, 1983, buyout. The trial is being held in a makeshift state courtroom near Detroit because the Irvine Co. is incorporated in Michigan.

Smith’s attorney, Howard Friedman, observed that in 51 board meetings that Bren attended from July 2, 1977, through January 14, 1983, he cast dissenting votes only twice.

Those two votes, Friedman added, involved development projects that did not reflect any of the sharp philosophical differences with other board members that Bren has cited in previous testimony.

Friedman noted that as a member of the Irvine Co. board and executive committee, Bren voted in favor of policies that he has severely criticized in recent court testimony.

Those policies include the company’s handling of a dispute over land leases held by purchasers of homes built on Irvine Co. property in Newport Beach and the loss of millions of dollars of potential profits in a sale of industrial acreage to the Daon Corp.

Bren responded that in discussions with other directors, he raised verbal objections that were not recorded in the board minutes. But when the issues were put to a vote, Bren testified, he often sided with the rest of the board at the encouragement of A. Alfred Taubman, the company’s former chairman.

“I went along with the other directors in the spirit of good will and cooperation, although intellectually I was opposed,” Bren said.

Bren pointed out that in a 1982 letter to Taubman and another director, Max Fisher, and in a memorandum to the entire board, he stated that he believed that the company had made many mistakes and lacked a consistent long-term business plan.

In the letter, he complained that after the company sold a Newport Beach property leased by Ford Aeronutronic in 1979 to the Daon Corp. for $17 million, Daon resold the 108 acres for $35 million.

Bren said Daon realized the gain because it had the property rezoned from industrial to commercial before the resale, an action he felt the Irvine Co. should have taken.

Bren blamed Kremer, who was president of the Irvine Co. from 1977 through 1983, for not recommending the best strategy for the Ford Aeronutronic property.

Similarly, he said, Kremer “never understood the magnitude of the leasehold problem,” referring to dramatic increases in residential lease payments on Irvine Co. property in Newport Beach. The dispute led to the filing of a class action lawsuit against the company in early 1982.

Political fallout from the dispute ultimately caused the Irvine Co. to delay a proposal to expand its Newport Center office and retail center in Newport Beach, an expansion that Bren said was worth $200 million to the company.

Bren said Kremer didn’t understand the ramifications of the leasehold issue and because of that the former president didn’t give the executive committee of the board--which included Bren, Kremer, Taubman and Fisher--sufficient information to make effective decisions.

Bren also criticized the company’s oversight of its former Irvine Pacific home-building division. He said he had complained that even when the division was losing money during the recession of the early 1980s, it attracted buyers to overnight camp-outs at subdivision openings by selling homes at prices below the company’s cost.

Although Kremer was in charge of the firm’s day-to-day management, Bren testified, the executive committee was unwilling to give him the title of chief executive officer. “It was the consensus of the executive committee that he was not qualified to be that,” Bren said.

Nonetheless, Bren acknowledged that he voted with the board majority in the summer of 1980 to grant Kremer a $220,000 bonus and a $38,000 raise, increasing his annual salary to $238,000. Over the next two years, he voted to further increase Kremer’s annual salary to $275,000 and to pay him an additional $476,000 in bonuses, court records show.

Bren said he voted for the raises and bonuses at Taubman’s request. He noted that when Kremer was granted his last raise, the board already was searching for his replacement. Bren said Kremer was asked to resign in October, 1982, effective January, 1983.

In other testimony Tuesday, Bren disputed Friedman’s suggestion that very little negotiation was involved in his April 15, 1983, deal to increase his ownership in the Irvine Co. from 34% to 86% by purchasing the stock of most of the company’s other owners.