Chris-Craft Chairman Herbert J. Siegel has moved his long-simmering feud with Warner Communications to a Delaware court, suing to gain access to a potentially embarrassing internal document about the company's dealings with a now-defunct theater linked to organized crime.
Warner Communications reacted angrily to the suit Wednesday, accusing Siegel in court papers of reopening a painful chapter to "extort" the entertainment company in an attempt to force Warner to repurchase Chris-Craft's 17% stake at an "unjustified profit."
Warner recently offered a complex settlement that would have netted a Chris-Craft-controlled company about $35.65 per share, or $1.25 billion, for its Warner stock, Warner Vice President Geoffrey W. Holmes said Wednesday. Instead, Holmes said, Chris-Craft asked for cash and other securities worth approximately $45 per share, at a time when Warner's shares were trading at about $30. Warner shares closed Wednesday on the New York Stock Exchange at $28.375, up $1.125.
A Chris-Craft spokesman acknowledged that negotiations recently occurred but called Warner's version of the settlement talks "materially inaccurate." He declined to elaborate.
Relations between the two companies have been testy for nearly three years, since Chris-Craft acquired a large block of stock to help Warner ward off an unwanted takeover bid by media magnate Rupert Murdoch. Over the past year, Warner's management has initiated actions that diluted Chris-Craft's voting stake from 29.1%.
Siegel's lawsuit, filed last Friday in a Delaware chancery court, names Warner and two of its outside directors, Lawrence B. Buttenwieser and Raymond S. Troubh, as defendants in its action to open a sealed report concerning the company's dealings with the Westchester Premier Theatre in suburban Tarrytown, N.Y.
One Warner official was convicted and two others pleaded guilty in the early 1980s to criminal charges stemming from a bribery-kickback scheme involving Warner and the theater. Several organized crime figures were convicted of skimming profits and driving the theater into bankruptcy.
But in January, 1985, the U.S. Attorney's office in New York said it had closed out its long investigation of Steven J. Ross, Warner's chairman, who had been called "the real culprit" by a federal prsecutor in an open courtroom statement in December, 1982.
In 1985, prosecutors said they were unable to develop evidence that they believed would justify bringing charges against Ross.
Siegel's lawsuit was filed in Delaware because that is where Warner is incorporated. The suit seeks a 663-page report prepared by Warner outside counsel Michael Armstrong, which purportedly was read only by two directors--Buttenwieser and Troubh. Siegel--who is also a Warner director--has been denied requests to see the report in April and May of this year, the lawsuit said.
Siegel has asked for an expedited hearing, contending that the information is relevant to Warner's June 24 annual meeting, since Ross and Buttenwieser are slated for reelection to the board.
But Holmes contended that Siegel and other directors voted unanimously in May, 1986, to seal the document after accepting a summary from Buttenwieser and Troubh. They concluded that "no present officer was implicated in the Westchester Premier case," Holmes said.
Reading from Warner's answer to the lawsuit, Holmes said: "The inescapable conclusion from the objective facts is that Mr. Siegel is using the threat of resurrecting the Westchester Theatre matter to extort an enormous and unjustified profit on the sale of his Warner stock, despite the fact that the events in question are 15 years old, are totally unrelated to Warner's current business affairs and that Warner's independent directors, in the exercise of their reasonable business judgment, have determined that the matter should be laid to rest and the Armstrong Report not made public."