Ovitz Testifies He Was Undercut by Eisner

Michael Ovitz testified today that during his ill-fated tenure as Walt Disney Co. president he trusted Chief Executive Michael Eisner “1,000 percent,” but found himself inexplicably undercut by Eisner and other executives.

Ovitz recounted being thwarted by Eisner in trying to craft potential deals that would have benefited the company, saying “he didn’t want to spend the money.”

Potential deals including one for the Putnam publishing house for $350 million, a company he argued is worth more than $1 billion today, and a half-interest in Sony Music. He said Eisner also would not let him try to sign singer Janet Jackson to a record deal at Disney.

Ovitz added that he could have settled a bitter lawsuit between Disney and former studio chief Jeffrey Katzenberg for about $85 million. Disney ended up paying Katzenberg more than $250 million.

Ovitz’s testimony came on the fifth day of a much-watched lawsuit in Delaware Chancery Court in which lawyers representing shareholders allege that company directors rubber-stamped Ovitz’s hiring by Eisner and failed to oversee his expensive dismissal 15 months later.

Ovitz left with a stock options and cash package that the lawyers estimate at $140 million. The plaintiffs are seeking to have Disney recoup $200 million in payments and interest. Ovitz actually reaped $109 million because some stock options expired.

Ovitz’s testimony about being undercut by Eisner comes even though the two men are on the same side as defendants.

Ovitz testified that his problems with Eisner and other executives started even before he took the job. The former top Hollywood agent testified that before he was hired he expressed reservations to Eisner about the steep learning curve he would have at Disney because he had never been an executive at a publicly held company.

“I said to Michael: ‘I need a year. You have to teach me what to do,’ ” Ovitz said.

Ovitz also recalled a meeting at Eisner’s home on the eve of his hiring being announced at which Chief Financial Officer Steve Bollenbach abruptly made it clear he did not consider Ovitz his boss.

“He looked me in the eye and said, ‘Hello, I’m not reporting to you,’ ” Ovitz said. “I said, ‘This is an interesting way to start my career at Disney.’ ”

Asked why he didn’t quit then, Ovitz said that he assumed Eisner would smooth things over.

“Frankly, I trusted him 1,000 percent,” Ovitz said. “He was one of my closest friends. I assumed over the next few months we would work it out.”