Expert: Ovitz Payout Couldn’t Be Withheld

Walt Disney Co. executives couldn’t have withheld former company President Michael Ovitz’s severance payment unless his expense-account violations amounted to the equivalent of a felony, an employment lawyer testified Thursday.

John C. Fox, a former Labor Department lawyer testifying in the Delaware trial of a Disney shareholder suit over the severance, said there wasn’t any evidence of wrongdoing in Ovitz’s handling of his expense account.

Investors contend that Disney Chief Executive Michael Eisner could have fired Ovitz without paying the severance because of expense-policy violations.

Disney investors claim that directors should be held financially responsible for Ovitz’s severance because they failed to oversee his hiring and firing properly. Eisner fired Ovitz in 1996 after he served only 15 months as president of the second-largest U.S. media company. Plaintiffs’ lawyers value Ovitz’s cash-and-stock payout at $140 million.

“When you strip away all the glitz and glamour, this is a simple failed-performance-expectation case,” said Fox, a partner at Mountain View, Calif.-based Fenwick & West. He said investors took the wrong path in trying to prove that Ovitz’s conduct justified not paying his severance.

To fire Ovitz without severance, Disney would have had to show that his actions amounted to gross negligence or malfeasance, according to court papers. Fox said that in California, an executive’s conduct has to amount to a felony under criminal law to meet those standards.

After reviewing the evidence in the case, Fox said he didn’t “find anything other than conjecture” that Ovitz sought to be reimbursed improperly or violated Disney’s gift-giving policies.