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Bonus onus on ‘dead witness’

Disney exec pegs proof on Wells

Disney chief operations officer Sanford Litvack testified Monday that he believed Jeffrey Katzenberg had forfeited a 2% post-termination bonus, but was not sure he could prove it in court because “I had a dead witness on my hands.”

Called as a hostile witness by Katzenberg’s attorney Bert Fields, Litvack was referring to former Disney prexy Frank Wells, who had negotiated the deal for Disney and authored most of the deal memos. Wells was killed in a plane crash in 1994.

Disney CEO Michael Eisner takes the stand today and if Litvack’s testimony is any indication, it will be highly contentious.

Katzenberg is suing Disney for payment under a contract clause that he says gives him 2% of the profits on all projects that he oversaw during his tenure at the company.

Focus on letters

Fields and Litvack sparred over the meaning of a series of letters written by and to Litvack after Katzenberg left the company in 1994. Katzenberg claims Disney wrongfully delayed telling him whether he was entitled to the bonus.

Litvack testified he quickly determined Katzenberg had forfeited the bonus when he left during an early window in his contract, but was undecided about trying to settle or “go to the mat” because he was concerned about how a “dead witness” would play in court.

Highlighting Wells’ central role in this case, Litvack testified, “Before Frank died, I didn’t even know there was an employment contract. But I read it (and a Wells 1993 letter questioning the bonus) and I told Arthur (Emil, Katzenberg’s attorney), it was forfeited.”

Litvack also gave a different meaning to Katzenberg’s earlier testimony that he was told if he “behaved himself” Eisner would look into the bonus.

Katzenberg testified that “behave yourself” meant not talking to the press. Litvack testified that Disney was concerned that Katzenberg would raid its employees.

Responding to a 1994 letter from Katzenberg’s attorney complaining that Disney was “treating him like a child or a ward whose behavior can be controlled,” Litvack said then that the company was concerned about how he would use “certain confidential information.”

Bonus on list

Disney board member Irwin Russell, who serves as Disney CEO Eisner’s personal attorney, also was called by Fields to testify about handwritten notes he took on the compensation committee’s meeting to approve Katzenberg’s 1988 contract. The notes listed terms of the deal, including what Katzenberg lost if he left in 1994 instead of 1996, such as stock options and a portion of what the company was contributing to a $5 million beach house.

One item on the handwritten list was the word “bonus” with a dash afterward. Russell testified Monday that what he meant by “bonus” was that Katzenberg would “lose the bonus” if he left early.

Fields asked Russell if there was any explanation for why it did not say “forfeit bonus” when his notes were so specific about what else Katzenberg lost if he left early.

“The notes speak for themselves,” Russell said.

“They do indeed,” Fields replied.

Last week’s trial took place in Century City offices. This week, the trial has moved to new digs one block away in the palatial mock courtroom of Disney’s attorneys. Thirty members of the press can be accommodated in the courtroom, but with Eisner as today’s witness, an SRO crowd is expected.