Topper's testimony kicks trial into high gear

A chatty Disney CEO Michael Eisner took the stand Monday to testify in a shareholder action that seeks to recoup the $140 million severance package paid to Michael Ovitz after his disastrous 14-month term as president.

Eisner’s first day of testimony was a relaxed affair, with the topper sporting a Mickey Mouse tie and trying to be forthcoming. Questioning focused on his enterainment industry training — “I’ve been on the upside and downside of hot many times” — his rise to the top position at Disney and the early days of his friendship with Ovitz.

In the coming days, testimony can be expected to get far more intense.

Eisner must convince the Delaware Chancery Court judge, Chancellor William Chandler III, that the hiring of Ovitz was more than just a personal favor and was carried out with the fully informed consent of the board of directors.

At the same time, he has to argue that Ovitz’s misdeeds while he was prexy of the Mouse House did not rise to the level of gross negligence — a standard that could have been used to nullify the terms of the severance agreement.

The shareholder case, originally filed in 1997, has been going on for several weeks. Eisner is expected to be on the stand for several days; Ovitz testified earlier in the trial for a total of five days.

In other testimony early Monday, former board member Roy Disney said that he first saw signs Ovitz was out of step with the corporate culture of the Mouse House three weeks after he came onboard as president.

Disney said that he attended an informal executive luncheon in October 1995 that was thrown by Eisner. Others in attendance commented that Ovitz was always late, Disney recalled, and he remembered thinking it odd that Ovitz already had a reputation of being tardy just a few weeks into his employment.

“It was something like cocktail hour, without the cocktails, but with that kind of babble,” Disney said.

“Ovitz burst into the room and it just stopped, like the switch got turned. He looks across the room and says, ‘I got a date with you at 3:30, see you at 4.’ He then vanishes into the phone booth and was gone another five minutes before he came and sat down. I got a funny sense from the body language of those in the room that there was an uncomfortableness about the relationship. In the more sensitive part of my brain, I thought, ‘Uh-oh, there’s trouble there in River City.’ “

In another circumstance, Disney recalled Ovitz’ discomfort with the public gladhanding that came with his post at Disney.

“I had to ride in a parade with him in a car through the streets of New Orleans, and our names were plastered all over the sides of the car,” Disney testified. “I was kidding with him, trying to get him to wave to the crowd and explaining that the fun of being in a parade is waving and getting a response back. We are Disney, after all. He had a hard time with that, he was a very private person, but I finally got him to wave.”

Despite these incidents, on an individual professional level, Disney firsthand saw no fault with Ovitz during his tenure at the Mouse House despite rumblings through the grapevine that he was losing support of other execs.

“It’s one thing to do this with massive hindsight and another thing to pinpoint your own feelings at the moment,” Disney said. “I actually had a pretty good relationship with Michael Ovitz while he was there. God knows the rumor mill was on full overtime — there was hearsay going around in every room on the lot — and you try very hard to discount it all, but you have to believe the tenor of what comes to you.”

Disney said that he asked no specific questions about the financial terms of Ovitz’s hire and that while he knew it was a substantial pact he did not know the value of the salary, stock options or bonus that were offered.

Disney testified that he trusted Eisner and the topper took “enormous pains to tell us that he and Ovitz could work together.”

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