Eyes on ethics and expenses

Lawyers grill Litvack on the stand at Ovitz trial

NEW YORK — Walt Disney’s former general counsel Sanford Litvack seemed mostly testy, at times downright furious Wednesday, as the plaintiffs’ lawyer pelted him with questions about events, meetings and conversations held eight years ago when Michael Ovitz was hired, then fired, as Disney’s president.

Litvack’s second day of testimony was a less friendly retread of the first as Litvack insisted that — much as he disliked Ovitz — there were no grounds to fire him for cause and withhold the former agent’s severance package, worth about $140 million.

Shareholders think there were plenty of reasons. Their lawyer Seth Rigrodsky grilled Litvack on Ovitz’s expenses, professional ethics and veracity.

Launching a surreal exchange on the pathology of truth, the lawyer noted a bitter memo Eisner addressed to Ovitz that read, in part, “I told you 98% of the problem was that I did not know when you were telling the truth about big things and about small things.”

Rigrodsky then reread Litvack’s own testimony about a heated argument between Litvack and Ovitz in which tempers flared. Later, Ovitz claimed he hadn’t been angry at all.

“Did he lie?” asked Rigrodsky.

No, said Litvack, “he didn’t think he lied for one second. He thought he was telling the truth.”

“Do you know what a pathological liar is?”

“Someone who does not know when they are lying or they are not lying.”

“Does that describe Mr. Ovitz?”

“Not at all.”

“Because Mr. Ovitz didn’t think he was lying?”

“I found it interesting that Michael Ovitz was absolutely convinced that he was not angry with me and that I had misread him. … If lying is deliberately telling someone a falsehood, then he was not lying.”

Rigrodsky asked if, according to Litvack, an exec could be fired for cause for lying to a CEO.

“It depends on the lie. If it’s because you lied about being late for a meeting, no,” Litvack said. “You tell me the lie, and I’ll tell you what I think.”

“It says he lies about big and small things… Was (Eisner) referring to being late for lunch?”

“I have no clue what he was referring to… I think if you had asked him then and there to give an example he wouldn’t have been able to think of one.”

“Because he made it up?”

“No, because he was angry.”

Rigrodsky produced another Ovitz-bashing Eisner memo that read, “and although I am not a bit angry…”

“I think Michael is a very emotional person,” Litvack said.

Litvack is also a lawyer, and the two engaged in bouts of legal sparring. Rigrodsky questioned why the board never prepared a final report of PricewaterhouseCoopers’ probe into Ovitz’s expenses — implying that a draft was “less discoverable” — or open to discovery in a lawsuit.

“Why would a draft document be less discoverable than a finished report?” Litvack challenged.

“Because they could claim attorney-client privilege.”

“They could do that as easily with the final document.”

“Maybe, maybe not.”

That report identified about $70,000 in expenses by Ovitz that lacked proper documentation or exceeded negotiated limits, as well as $69,000 related to a screening room and security system installed at Ovitz’s home. As a result, Disney took about $140,000 of the $1 million it had withheld from Ovitz’s package to resolve outstanding expenses.

The lawyer pounded on trips Ovitz may have made on the Disney jet after he’d been ousted. And he produced receipts showing that Disney agreed to pay Ovitz about $98,800 after he joined the company to buy his BMW. That’s what Ovitz paid to buy the car through CAA months before.

Disney sold the car for $54,000 after Ovitz left the company.

“It was a used car, and you paid the full purchase price. You paid him what he paid for a used car.”

Rigrodsky again asked Litvack why he didn’t seek an outside opinion on whether Ovitz could have been fired for cause. Litvack said he talked to Mort Pierce, a lawyer at his former firm Dewey Ballantine. He acknowledged there was no record of what was discussed and that Pierce has said that he didn’t remember the conversation.

“He said he has no recollection. That’s fine. I do.”

And Rigrodsky tried to paint a picture of an overly cozy boardroom where directors declined to challenge each other during meetings — but only did so later on, in private, if ever. Litvack wasn’t absolutely sure all the board members knew at a Dec. 10, 1995, meeting that Ovitz was on his way out but assumed they knew because it was Eisner’s habit to keep them informed.

“It wasn’t secret; there were stories in the press. You’d have to be from Mars not to know that.”

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