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Mouse mauls missed Katz computations.

HOLLYWOOD During a week of intense cross-examination in the Jeffrey Katzenberg vs. Disney lawsuit, attorneys for the Mouse mortally wounded one of Katzenberg's expert witnesses, while another emerged bloodied but still standing.

Katzenberg, former head of Disney's filmed entertainment division, is trying to prove that a bonus he is owed -- based on 2% of profits in perpetuity from all films and television shows made while he worked for Disney -- is worth $342 million-S578 million. Disney contends it is worth about $140 million.

Katzenberg's experts -- Dennis Soter of the consulting firm Stern Stewart & Co. and Michael Wolf of Booz-Allen & Hamilton -- constructed economic models to calculate the bonus.

Surprise numbers

Soter's model, under which Katzenberg's bonus was computed to be $578 million, suffered the most damage under cross-examination by Disney attorney Harry Olivar, who produced a surprise spreadsheet showing that Soter had miscalculated the income from dozens of films.

Soter's model was based on his analysis of a comparable deal -- Disney's 1995 buyout of three Silver Screen limited partnerships for $500 million.

But the Disney spreadsheet showed Soter had erroneously subtracted "shortfall payments"-- extra payments made by Disney to Silver Screen. As a result, Sorer had derived a figure of $19.4 million as Silver Screen's annual income, when it was really more than $50 million.

This miscalculation, in turn, affected a ratio between the purchase price and annual income that Soter used in other computations.

After questioning Soter about how he came up with the $19.4 million figure, retired Los Angeles Superior Court Judge Paul Breckenridge, who is hearing the case, noted, "You don't buy an annual income stream of $19.4 million for $500 million."

Exhibit contested

Katzenberg's team cried foul over the surprise spreadsheet, and have filed a brief asking that Disney be precluded from using the document.

Wolf, who constructed two economic models that predicted bonuses of $342 million and $482 million, suffered less damage, although he was forced to admit mistakes in his models that diminished Katzenberg's bonus by about $3 million.

Whether the errors did more serious damage to Wolf's credibility -- especially where he has made big-dollar predictions about such things as video-on-demand and revenues from China and India -- was unclear; Breckenridge gave no clue.

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Author:SHPRINTZ, JANET
Publication:Variety
Date:Jun 21, 1999
Words:370
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