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Ovitz: I was Santa Claus

Mike defends expenses at Disney

NEW YORK — A weary-looking Michael Ovitz concluded five days of testimony Monday insisting the generous severance clause in his Disney contract was well justified by the risks of his new job and the hefty pay of his previous one. Refusing to be cowed by an aggressive tour of his expense account, he willingly portrayed himself as an intrepid and dedicated showbiz Santa Claus.

“I gave presents to everyone. … I pioneered the idea of giving goodwill gifts to people to mark occasions,” the former Disney president told a Delaware court.

“I would do whatever I thought would ingratiate these people to the company,” he added, referring, in particular, to influential investors in Disney stock.

“Do you recall giving a birthday present to Dustin Hoffman?” asked plaintiff’s lawyer Steven Schulman.

“Yes,” said Ovitz.

To Barry Levinson? To Ronald Perelman? To real estate developers, fund managers and other Disney executives? Yes, yes and yes.

Car to Mouse exec

Disney even “gave a car on my suggestion to (Walt Disney studio chief) Dick Cook,” he noted.

The two sparred over whether Ovitz had lunched with MGM owner Kirk Kerkorian. “I don’t know. I know a Krevorkian, they always get confused. … I do know a Kirk Kerkorian. I just don’t know if this is the same person.”

Ovitz, who frequently sighed and removed his glasses to rub his eyes, said he was aware the company was preparing an audit of his expenses but that he never received a copy of the final report by PricewaterhouseCoopers.

He defended walking away with $140 million — his prize for a no-fault termination 14 months after he started the job at Disney.

“I was giving up a lot to take this position. My business was on the rise. … So we covered the front side, and we covered the back side.

“I spent my entire life protecting the upside and the downside for other people,” Ovitz added. “It’s part of the whole negotiation. One doesn’t negotiate for the good times; one negotiates for the contingencies.”

The payout in his contract is the centerpiece of the shareholder lawsuit that accuses Disney’s board of failing to properly vet Ovitz or the terms of his employment. Shareholders also hold that Disney could have fired Ovitz for cause without paying him a dime. They want the board to repay the $140 million, plus interest, and cover their costs in the 7-year-old suit.

Ovitz: No accusations

Ovitz said Disney had never accused him of gross negligence or malfeasance and that his understanding was that gross negligence or malfeasance would have to be activity that was “immoral” or “illegal.”

There’s no jury, so the judge, William B. Chandler III, will decide the case in Delaware Chancery Court, a specialized business court.

Ovitz vacated the stand Monday afternoon for former Disney director Irwin Russell, who began a painstaking account of the mating dance between Disney and Ovitz — from the very first memo.

Russell, who served for years as Disney topper Michael Eisner’s personal lawyer, said he was the first to approach Ovitz about moving to Disney, through Ovitz confidant Bob Goldman.

Russell was chairman of the compensation committee of Disney’s board at the time. The committee eventually agreed to pay him a $250,000 fee for negotiating the contract with Ovitz.

Russell left the board in 2001, when, he said, age requirements in the company’s bylaws forced him to step down.

He said there were few people who could have been comfortably dispatched by Disney “to negotiate with someone who would have been their boss.”

“The only one was Sandy Litvack,” he said, referring to Disney’s general counsel. But “we knew that Sandy aspired to the job himself (so) there was a certain degree of uncertainty in having Sandy do it.”

Long considered for job

He said Eisner had talked for years about the possibility of wooing Ovitz to Disney but got serious when he heard rumors that Ovitz was negotiating a move to Universal Studios’ then-parent Seagram.

“Mr. Ovitz was one of the most successful and influential people in the industry at the time,” Russell said, and Disney badly needed a top creative dealmaker “who could relieve Eisner of the responsibility of being the front man and who could go out and attract interesting people.”

Russell described a series of preliminary meetings that brought the two sides gradually closer together on terms. Major Disney shareholder at the time Sid Bass and former board member Roy Disney were the only others apprised of the negotiations in their early stages. Russell said neither objected to moving forward.

Russell said Goldman told him that Ovitz was making between $20 million and $25 million a year at CAA. He said Ovitz’s camp indicated at one point that “Eisner had an $8 million share (option) grant (and) if we came up with $6 million, that might be acceptable.”

Russell said he felt it logical to use the contract of Frank Wells, Disney’s former No. 2 who died in a helicopter crash in 1994, as the basis for Ovitz’s contract.

Talks heated up after Ovitz’s deal with Seagram fell through.

Russell will continue his testimony on Wednesday. The court is closed today and Thursday.

Executive compensation expert Graef Crystal and then Roy Disney are next up on the witness stand. The trial is expected to take at least a month.

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