Eisner Couldn't Trump Ovitz

Michael Ovitz's days as president of Walt Disney Co. were no longer numbered. They were over. But he would not go quietly into unemployment.

Ovitz's former boss, Disney Chief Executive Michael Eisner, testified Wednesday in a shareholder lawsuit that the onetime Hollywood super agent's departure came with demands for expensive perks, face-saving statements to the press and double-crosses.

It took weeks, Eisner said, for Ovitz to even get the message -- conveyed several times -- that he was losing his job after 15 tumultuous months.

"He would not accept being fired," Eisner said, later adding: "Nobody has been fired as many times from one job as Mr. Ovitz."

Eisner's recollections of his second in command's final days at Disney represent the most detailed account to date of the secret tug-of-war that played out in the executive suites of the famed Burbank entertainment company. Eisner's portrayal of the events came during aggressive cross-examination in the 7-year-old shareholder lawsuit, which accuses the company's board of directors of improperly paying Ovitz a severance package valued at $140 million.

The plaintiffs contend that Ovitz's performance was so poor that he should have been terminated "for cause," negating the payout provision contained in his contract. In the nonjury trial, the shareholders are asking that $200 million, including interest, be returned to Disney's treasury.

The defendants -- current and former Disney directors -- contend that Ovitz was entitled to the severance because he did not engage in gross negligence or malfeasance. Should the judge rule against them, any penalty would be paid by insurance companies.

During his three days on the stand, Eisner has painted an unflattering portrait of his former friend, a man once toasted as Hollywood's most influential powerbroker, a reputation he earned as co-founder of Creative Artists Agency. Eisner has described him as elitist and duplicitous, unable to accept his station in life as Disney's No. 2.

Ovitz, in earlier testimony, was equally harsh on Eisner. He said Eisner, whom he described as his closest friend, had undermined his every effort to broaden Disney's reach, dooming him to failure for reasons he has yet to understand.

But both men, who are on the same side in the case, are agreed on this: The severance package was proper.

Much of Eisner's testimony Wednesday centered on his efforts to dislodge a recalcitrant Ovitz. The Disney chief provided a chronology that spoke loudly to the dynamics within the company at the time and the sense of entitlement that seems to accompany power in Hollywood.

During testimony frequently challenged by shareholder attorney Steven Schulman, the Disney CEO said he told company directors of Ovitz's imminent firing during a discussion in November 1996. Ovitz, he said, was lingering outside the glass doors of the conference room.

Eisner said he enlisted director Gary Wilson to persuade Ovitz that it was time to go. Wilson owned a yacht with Ovitz, and the two took a cruise through the Caribbean during the Thanksgiving weekend.

After a few days, according to Eisner, Wilson called to say that the situation was bleak. Although Ovitz now seemed resigned to his fate, he was acting like a "wounded animal in a corner" with a "dangerous attitude," according to Eisner's notes, which were read in court.

The next month, Eisner said, Ovitz asked that he be allowed to remain on the board and be provided with an office and staff, requests that eventually were rejected. Eisner said he agreed that Ovitz could buy back for market price the Gulfstream III private jet he had sold Disney when he joined the company.

"I didn't really care," Eisner said. "I wanted him out."

A few days after that meeting, Eisner said, he met again with Ovitz, this time in New York at the apartment of Eisner's deceased mother. There, Eisner said, the two men negotiated an exit strategy.

Among other things, they discussed possible consulting work Ovitz might do for Disney and how they could craft a news release to soften the public humiliation for Ovitz, making it appear he was leaving by "mutual consent" rather than being fired.

"I will miss Michael's energy" and "creativity," Eisner was quoted as saying in the release. Asked Wednesday whether he was telling the truth, Eisner said that in business and politics "you say nice things. Nobody believes them but you say them."

Shortly after the release went out, Ovitz's actions infuriated Eisner. Ovitz, he said, had broken his word to keep quiet about the severance package. He said Ovitz had hired a prominent public relations man who was "spinning incredibly all over town," suggesting that Ovitz "had taken Disney for a ride" by obtaining a hefty golden parachute.

"It was an incredible betrayal," Eisner said. "I had bent over backward -- not because he was a friend. I would do the same thing for anybody leaving the company under those circumstances. And he just threw it right in the company's face."

Four days after the firing, under the code name "MikeRust," Eisner vented his anger in an e-mail to the head of public relations, John Dreyer, in which he described Ovitz as a "psychopath" who "cannot tell the truth."

"I was as mad as I've ever been," Eisner testified. "I was furious. I had spent a year trying to educate him. I thought I showed enormous patience.... I'm not saying he did anything illegal. I'm saying he did something despicable. He abused me as he had been abusing the position. It just drove me nuts."

Eisner said he was powerless to deprive Ovitz of the cash and stock severance package at the heart of the lawsuit.

The company's chief lawyer, Sanford Litvack, had concluded Disney could not legally deny Ovitz his severance. Eisner said he asked Litvack to consult with outside lawyers, who agreed.

In the end, Eisner said, firing Ovitz, whose arrival at the company was trumpeted as a major coup, was tough but necessary to protect the company.

"People think because you make fuzzy, cute little cartoons that you are fuzzy and cute, and they try to take advantage of you," the chief executive said.

As the relationship between the two men neared the breaking point in 1996, Eisner said, he sent a memo to two company directors with a clear message: If he died, don't let Ovitz talk his way into the job.

Eisner, who had earlier undergone quadruple bypass surgery, said he feared that Disney directors might be vulnerable to the former talent agent's charms in his absence. This was, he noted, the same master salesman who talked liquor scion Edgar Bronfman Jr. into buying Universal Studios and who coaxed top stars Dustin Hoffman and Tom Cruise into starring in "Rain Man."

"You know, he is extremely facile," Eisner said. "Everybody is brilliant. Everybody is wonderful. Everybody is fantastic. He uses these kind of superlatives. He weaves a very attractive picture."

Eisner is scheduled to continue his testimony today.