Parents, shield the youngsters’ eyes. You may find disturbing images of the nation’s biggest media companies in the newspapers and on television.
Some stories are about dog-eat-dog executives. Others evoke Mad magazine’s “Spy vs. Spy” or the movie, “Dumb and Dumber.”
We now have “Lettergate,” with Walt Disney Co. accused by America Online Inc. of keeping mum after it mistakenly received some confidential AOL material. The incident is part of a months-long feud, with Disney attacking AOL’s pending acquisition of Time Warner Inc. as anti-competitive.
You’ll recall that in April, Time Warner shut off Disney’s ABC programming in some monopoly cable TV markets in a dispute. Time Warner was ridiculed for making a dumb move while its merger plan is still under regulators’ review.
Disney, savoring a public relations victory in that dispute, stepped up its assault on the AOL-Time Warner transaction. But it has a setback with Lettergate, which began when a Washington law firm e-mailed the confidential information to Disney executives in late September. Although the mistake was discovered within an hour, Disney didn’t tell AOL for five days.
Now AOL has written an indignant letter to federal regulators demanding its own look at Disney’s e-mail. The trade publication CableFAX said the “bone-headed gaffe” may “distract and stall Disney” in its effort to thwart the merger.
Questionable tactics
Outside Washington, behavior is loonier.
In May, Time Warner briefly offered rewards to employees of its Houston cable system to place bogus orders with a competitor. The idea was to glean information at the rival’s service area for digital subscriber lines, which compete with cable in delivery of high-speed Internet service.
The competitor, SBC Communications Inc., complained loudly to federal and state regulators after it discovered the ruse, contending that it costs hundreds of dollars to process each phony order for its DSL service.
Disney, meanwhile, has been found at fault in a spate of recent court decisions: cheating a European business partner, stealing ideas and coercing a dying, AIDS-infected Disney executive to give up millions of dollars in benefits.
In a ruling last year, U.S. Appeals Court in San Francisco found Disney’s mistakes far from innocent in its dealings with Marsu BV, a European publishing and licensing firm that entrusted its Marsupilami comic-book character to Disney in 1990.
Disney had likened Marsupilami’s potential to Mickey Mouse, but instead of producing 13 promised half-hour TV shows, Disney never offered the project to networks.
Disney executives including Chairman Michael Eisner and former consumer products executive Steve McBeth engaged in “fraudulent concealment,” the trial judge found. Disney concealed its neglect from Marsu so the character wouldn’t be shopped to rivals. In a 3-0 ruling, the appellate court upheld the decision to award $9.3 million to the European company.
In August, an Orlando jury ordered Disney to pay $240 million in damages for stealing the idea of a sports complex from two businessmen. The pair’s legal team cited more than 200 telephone calls between their clients and Disney in a three-year period. Disney immediately vowed to appeal.
Last month, a federal judge in Los Angeles upheld most of a jury’s finding that Disney owes the estate of Robert Jahn, an AIDS-infected executive who was coerced into giving up insurance and other benefits before his death.
During the trial, Disney contended that Jahn agreed to forfeit all non-medical benefits in exchange for Disney’s agreement not to expose him for allegedly taking kickbacks from a vendor. But the jury concluded that Jahn had not taken kickbacks and that Disney had coerced the dying man, who supervised Disney’s movie ads. A final monetary award has not been determined.
Political infighting
From such grim courtroom scenes, it’s almost a relief to return to Washington, where Disney and AOL are jockeying for influence with lawmakers and regulators.
In a lengthy filing with the Federal Communications Commission, Disney has urged the agency to force AOL-Time Warner to separate its content and cable TV distribution businesses. Barring that, Disney wants stringent rules attached to the merger, to ensure fair treatment.
AOL, for its part, has suggested that Disney is just angling for some commercial advantage. George Vradenburg, AOL’s senior vice president for global and strategic policy, said as much when he recently appeared, with top Disney lobbyist Preston Padden, at a panel discussion of the merger at American University in Washington.
Vradenburg and Padden both previously worked for Rupert Murdoch’s Fox Entertainment Group, but a former colleague says there was no love lost between the two.
It was Vradenburg who signed the AOL complaint in Lettergate. Vradenburg has asked the FCC to force Disney to account for the five-day delay in admitting that it had received confidential AOL material, in violation of an FCC protective order.
Like the Cold War caricatures in Mad magazine, Disney and AOL may drag out their version of “Spy vs. Spy” for countless weeks, or even years. It would be a funny spoof for the magazine, but Mad is owned by oops Time Warner.
