Litvack in plaintiff's cross hairs
NEW YORK — Bang, bang!
Former Walt Disney general counsel Sanford Litvack seethed Thursday as he was accused of being “asleep at the switch” in letting Michael Ovitz walk away with a $140 million golden parachute — and grilled as to why it was acceptable for Ovitz to give a $946 gun to director Robert Zemeckis, a gift paid for with Mouse House coin.
“Do you think it’s appropriate to give firearms to people regardless of the purpose?” said Seth Rigrodsky, who is representing Disney shareholders at the trial under way in Delaware. “It’s OK for someone to go out and buy a gun using Disney money?
Litvack, spending his third and final day on the stand, lost his cool on several occasions during the tense cross-examination session. At one point, Rigrodsky even admonished Litvack to “simmer down.”
On the subject of the gun, the court eventually intervened and told Rigrodsky to move on to another topic.
Rigrodsky said Litvack’s apparently nonchalant attitude about Ovitz’s unusual and sometimes lavish gift-giving on Disney’s dime spoke to a larger pattern.
Litvack “frankly was asleep at the switch,” Rigrodsky said.
As he did during his previous days on the stand, Litvack continued to argue that while he thought Ovitz –with whom he clashed badly from the outset — was a failure as Disney president, Ovitz couldn’t have been fired for cause. Hence, Ovitz was entitled to the severance package.
“He was terminated because he didn’t fit in, because he didn’t do his job, because he failed in his performance. He wasn’t terminated for giving someone a $100 gift or any of those things. He was terminated because he didn’t work out. That’s why I determined it should be without cause,” Litvack said.
Disney shareholders argue otherwise, contending the Disney board and top execs failed to properly scrutinize Ovitz’s employment contract and again breached their fiduciary duty by granting him a no-fault termination after he’d been at the Mouse House a short 14 months.
Board in the dark?
Rigrodsky sought to paint a picture of Litvack as a general counsel who barely seemed concerned with monitoring Ovitz’s lucrative employment contract, which included a heavy helping of stock options, and who later kept the board in the dark about the fact that he and Disney topper Michael Eisner both wanted Ovitz to go.
Litvack countered repeatedly that his decision to terminate Ovitz without cause was the right conclusion since there was no gross negligence or malfeasance. He bristled at the suggestion that he himself ever failed in his duties as the conglom’s top attorney.
Litvack did admit that he remained silent during a board meeting in late September 1996, even though he and Eisner had already agreed Ovitz must be terminated. Ovitz didn’t leave the company until the end of December.
“Were you aware that Mr. Eisner appeared on Larry King’s show right before then … and said during the interview that he’d hire Mr. Ovitz again? Do you recall that?” Rigrodsky said.
“Not clearly, but I think I do,” Litvack replied.
“In fact, you knew the opposite was true,” Rigrodsky said.
“I knew that Mr. Eisner wanted Mr. Ovitz to leave,” Litvack said.
Rigrodsky also peppered Litvack with questions as to why he nominated Ovitz as a Disney officer at a November 1996 board meeting.
Litvack said it would have been a breach of Ovitz’s contract not to nominate him. “I also told you that I thought he’d never be there to serve on the board. I understood he was to be fired,” Litvack said.
In Perry Mason fashion, Rigrodsky then referred to Disney’s corporate guidelines, which include a resolution adopted during Litvack’s tenure stating that company directors will receive information and data that is important to their understanding of the business.
“You would agree with that?” Rigrodsky said.
“I agreed it was good,” Litvack said.
Later, after the cross-examination had finished, Litvack was given the chance to backtrack and defend the relationship between Disney’s exec suite and the board.
“Mr. Eisner always totally leveled with them about the things that were good and the things that were bad. He would go all over the lot and tell them whatever was going on at the time,” Litvack testified.
Litvack downplayed any suggestion that he had carefully babysat contracts Disney signed with CAA during Ovitz’s tenure at the Mouse House, including the proviso that he sign off on any CAA deal worth more than $100,000.
Litvack said the purpose wasn’t to prevent Disney from doing business with CAA but rather to make sure Ovitz wasn’t put in a situation that might appear to be a conflict of interest.
Earlier during cross-examination, Litvack said he wasn’t aware of the details of any payout Ovitz might be getting from CAA during the time Ovitz was at Disney.
“I’ll say it one more time. I’m not sure whether it would have been relevant. He made what he made,” Litvack testified.
“Don’t you think the board of directors should know that he stood to earn tens of millions of dollars?” Rigrodsky asked.
“That presumes it was illegitimate. I do not agree with you,” Litvack said.
Rigrodsky went through a list of preliminary flash deal summaries proposed between previous CAA clients and Disney during Ovitz’s tenure, including a screenplay acquisition by writer Robert Kamen, an option for a book written by Carsten Stroud and a development deal for Lauren Shuler Donner and Richard Donner.
“If you look, most of these things were never made into movies,” Litvack said. “You do understand that if they looked at a deal and didn’t do it, I would never know about it.”
Litvack did vaguely remember a development deal with Sally Field, then a CAA client.
Rigrodsky suggested that Litvack was contradicting his own deposition, during which Litvack said the Field deal was a “mystery” to him.
Echoing the testimony of Eisner and former Disney chief financial officer Stephen Bollenbach, Litvack said Ovitz deserved his employment package considering that he had made $25 million a year at CAA.
And like them Litvack seemed to soften his previous criticism of Ovitz for being extravagant and out of touch.
Litvack testified that Ovitz was smart for giving gifts to top Hollywood talent, even if those stars weren’t doing Disney projects at that particular time and just happened to be clients of CAA, the agency Ovitz co-founded.
For example, Litvack said it was “perfectly intelligent” for Ovitz to have given a $860 print to Dustin Hoffman, one of the biggest stars in Hollywood.
“Every one of these expenses is something I would have approved if they were reasonable and they related to the business of the Walt Disney Co. For you to take the narrow approach and suggest I was somehow asleep at the switch is outrageous. Your notion that we shouldn’t have been doing business with CAA reflects a totally unrealistic view of a business you don’t understand at all,” Litvack said.
“Under normal circumstances, I would have that stricken from the record,” Rigrodsky said.
Litvack shot right back: “Under normal circumstances, I wouldn’t answer.”
Yet Ovitz himself testified that Litvack had given him grief for some of the gifts, which also included a $4,424 Sugimoto print to Tom Hanks, a $82 welcome basket to Tom Cruise and a $495 jeweled gewgaw to David Letterman.
Thursday, Litvack said he didn’t recall such a conversation.
Litvack downplayed questions raised during a PriceWaterhouse report on Ovitz’s expenses, saying that Ovitz was ultimately charged for $140,000 in discrepancies but that there was no egregious behavior.
Rigrodsky also suggested it was wrong for Litvack to allow former Disney board member Irwin Russell to vote to approve Ovitz’s employment contract when Russell had received a $250,000 fee for negotiating that same contract.
The trial won’t resume until Monday. Next week’s witness list is likely to include former Disney board member and thesp Sidney Poitier.