Katzenberg asserts in a lawsuit that Disney owes him $250 million in bonuses. Disney counters that the former Disney Studios chairman lost his right to more bonuses by leaving the company when he did. In his 1984 and 1988 contracts, Katzenberg apparently was granted 2 percent of the studio’s adjusted operating income from all movies and TV shows he put into production. The contract was signed before the animated films started to hit with “The Little Mermaid” in 1989. The trial is set for Nov. 18.
Spectators will want a front-row seat for this show. Start with the mysterious “Project Snowball.” In an Eisner deposition, NEWSWEEK has learned, Katzenberg’s attorney asks if he knows about it. “Never heard the word,” replies Eisner. “Were you aware that there was a secret project going on under [late Disney president Frank] Wells’s aegis stimulated by the fact that Mr. Katzenberg’s two percent in 1990 started to run at far higher levels than previously anticipated?” asks Katzenberg’s attorney. Eisner replies, “No, because I would say that I doubt whether a project was put into work stimulated by the fact that his two percent was higher than anticipated.” What do Katzenberg’s attorneys contend that “Project Snowball” was? “I’m ordered by the court not to discuss this stuff,” says Katzenberg lawyer Bert Fields. Disney spokesman John Dreyer says he hasn’t “a clue,” adding that “our guys” will handle this case in court, not the press.
Perhaps, but Disney has had some setbacks. Earlier this summer, the court sided with Katzenberg in granting him access to certain notes and transcripts used for Eisner’s as-yet-unpublished autobiography. Last month, Disney attorneys failed to disqualify Katzenberg’s legal team. They had argued it was a breach of confidentiality when one of Katzenberg’s lawyers, a former Disney employee, contacted another former Disney employee, who passed along a memo described by Disney as a “road map” of the company’s potential accounting “vulnerability.”
This trial is split in two stages. The first round, before a jury, will determine if Katzenberg is owed more money. If he wins, a referee will decide how much he’s owed. Katzenberg lawyer Fields told NEWSWEEK that he may challenge Disney’s accounting practices by introducing an expert witness, CPA Philip Hacker, during round two. Hacker has made a declaration in court files, NEWSWEEK has learned, that “based on my experience in auditing the Walt Disney Co., it is highly probable that … additional monies were payable to Jeffrey Katzenberg.” Says Disney’s Dreyer, “Katzenberg would be the best expert witness. I assume he’s attacking his own accounting practices.”
Let the fireworks begin.
