Eisner Admits He Hid Disney Turmoil

GEORGETOWN, Del. - Walt Disney World was anything but the happiest place on earth when Michael Eisner and Michael Ovitz visited the Florida theme park for its 25th anniversary party in September 1996.

News reports were flowing out that Disney chief Eisner’s hiring of Ovitz as his second-in-command one year earlier was a disaster. To answer back, the two went on CNN’s “Larry King Live,” where Eisner called the rumors “baloney,” started by jealous competitors.

But under cross-examination today in a shareholder lawsuit here, Eisner acknowledged that it was all a cover. On the very day of the TV interview, Eisner testified, he informed board members that his relationship with Ovitz had deteriorated so badly he wanted to trade him to rival Sony Pictures Entertainment.

“Michael Ovitz and I both were trying to make it look like we were getting along I can’t say it was completely candid to the public in that my goal was not to rehire him at the time. My goal was to end the problem,” Eisner said.

Boring in on Eisner’s veracity, shareholder lawyer Steven Schulman questioned Eisner repeatedly on why he portrayed his relationship with Ovitz going well as it was imploding behind the scenes.

Shareholders are seeking to undermine Eisner’s story that he involved directors in the hiring and firing of Ovitz, and that the company had no choice and had to pay him a stock-and-cash severance package that plaintiffs value at $140 million.

In his testimony, Eisner justified his statements by saying that the rumors of a rift were hurting the company internally and externally, and may have jeopardized efforts to complete the Sony trade.

What’s more, he said, Ovitz’s fate had yet to be settled, and that shareholders were best served by the two men presenting a united front.

“I was trying to keep 110,000 people comfortable with the company,” he said. “It’s a traditional fine line in politics or in business as to how much to reveal to the public before you have actually concluded your decision-making process so as to be clean and clear.”

Eisner said he had another motivation to give the impression that the two were in sync: He and Ovitz were about to meet with Sony chief Nobuyuki Idei about the plan to trade Ovitz to Sony, which would have gotten Disney off the hook in paying severance.

“We were meeting with Sony to talk about a divorce,” Eisner said.

He said he feared if the men didn’t do the interview, Sony might get wind of the reports about a rift between them and scrap the idea of hiring Ovitz, a worse outcome for shareholders.

“I was also trying to convince Sony,” Eisner said, that Ovitz was “the greatest human being.”

Nonetheless, Eisner acknowledged that in retrospect the interview was a mistake and that Disney directors told him the interview was awkward, given his fallout with Ovitz.

“It was unfortunate, it was stupid and I wish we hadn’t done it, but we did,” Eisner said.