Bitter enemies battle over Disney bonus deal

THE GLOVES have come off and the prize fight has begun. Michael Eisner and Jeffrey Katzenberg, two of Hollywood's bitterest, and most powerful, enemies, began slugging out their differences in open court yesterday, turning a long-running contract dispute into a personal slanging match that risks exposing low intrigue and perverted ambition at the heart of the Walt Disney Company.

Mr Katzenberg, who now runs the new studio DreamWorks with his friends Steven Spielberg and David Geffen, is suing Disney for at least $250m (pounds 156m), arguing that the company deliberately tried to cheat him out of a lucrative bonus deal after he stepped down as its studio head in 1994.

Mr Eisner, Disney's chief executive officer, has conceded that the company owes Mr Katzenberg something but appears determined to fight him down to the last dime rather than admit defeat.

And that is just the polite version of their relationship, which has soured so badly that each can barely stand to mention the other in public.

In his opening remarks on Monday, Mr Katzenberg's lawyer, Bert Fields, accused Mr Eisner of seeking to punish his former studio head out of "personal animosity". He said Mr Eisner and two of his Disney colleagues had conspired to cheat Mr Katzenberg out of a 2 per cent cut of the profit on all projects he had originated, and even nicknamed their plan Operation Snowball.

"Each story [the three Disney executives] told is patently untrue. I don't say that lightly," Mr Fields charged.

On the other side, Disney's lawyer, Louis Meisinger, accused Mr Katzenberg of hogging the credit for successful projects, failing to treat Roy Disney, son of the legendary Walt, with due respect, and attempting to portray himself as a victim when in fact he had received $100m in compensation in his 10 years with the company, including bonuses, stock options and a $5m beach house.

Mr Katzenberg set "a new standard for arrogance in an industry that already has a high mark in this area," Mr Meisinger said.

The public vilifications were expected to intensify yesterday as Mr Katzenberg took the stand. He appears hell-bent on throwing Mr Eisner every punch he has, on the basis that the more he can embarrass Disney the faster he will clinch a settlement.

The public airing of the court case is a victory for Mr Katzenberg. Mr Eisner battled long and hard to keep the media out, and is still doing his best to withhold court documents from the public record.

Once, Mr Eisner was best friends with Mr Katzenberg and personally lured him to Disney in 1984. Mr Katzenberg rapidly turned an anaemic film division into a roaring success, reviving the moribund animation division to produce such hits as The Lion King, Beauty and the Beast, Aladdin, and more.

The Disney board were reluctant, however, to award Mr Katzenberg a lucrative stock-option deal because they had already given as much as they could afford to Mr Eisner and his number two, Frank Wells. The 2 per cent bonus deal was seen as the next best thing, a potentially enormous benefit since it applied to the revenue of Disney products - films, videos and toys - in perpetuity.

The rift came in 1994, when Mr Eisner refused to promote Mr Katzenberg to the number two slot, vacated after Frank Wells died in an accident. Mr Katzenberg cut his contract short to join DreamWorks - a gesture Disney interpreted as a forfeit on his bonus. They have been arguing about it ever since.