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BREN'S BATTLES ON THE STAND : During Trial, Developer Insists He Was the Savior--Not Villain--in Irvine Co. Buyout

November 08, 1987|LESLIE BERKMAN | Times Staff Writer

Concluding 10 days on the witness stand last week, Donald L. Bren, the impeccably stylish and characteristically cool chairman of the Irvine Co., was slightly crumpled and impatient.

The pressure had been grueling. In great detail, sometimes with the aid of scribbled notes and memoranda from bygone meetings and telephone calls, he had been asked to explain how and why he took control of the Irvine Co. four years ago.

Smoothly and adeptly, during two days of initial questioning by his principal lawyer, Bill Campbell, Bren said he acquired majority ownership of the large Orange County land development company to save it from mismanagement and to protect his investment in the firm.

Then, for eight days, opposing counsel Howard Friedman asked Bren about documents that Friedman hoped would show that, far from being a white knight, Bren was an opportunist who plotted to undermine the company's management and to acquire control at a bargain price.

Bren was the most important witness so far in a lawsuit that will settle a dispute about how much money heiress Joan Irvine Smith, and her mother, Athalie Clarke, should be paid for the 11% stake they held in the Irvine Co. before Bren's 1983 buyout.

By the time Friedman was finished, he had raised a number of red flags regarding Bren's methods and motives. But he had trouble refuting Bren's basic argument that the price he paid to acquire control was effectively endorsed by the company's other shareholders, who have testified that they still believe that they got a good deal.

Ultimately, a decision will be reached by Robert B. Webster, a retired judge serving as a court-appointed referee in the Irvine Co. trial, which is being conducted in the Detroit suburb of Bloomfield Hills. The lawsuit is being heard by a Michigan state court because the Irvine Co. is incorporated in Michigan.

Since August, Webster has been listening as Irvine Co. presented its case. Smith's lawyers are expected to begin offering their witnesses, including a cadre of evaluation experts and Smith herself, in January.

Because of the unusual length of the trial, which is expected to continue into the spring, it is being held in a suite in a suburban office building instead of in a courtroom.

The stakes are high. Bren says the Irvine Co., in which he now holds a 92% interest, is willing to pay Smith and her mother only $88 million, less than the $114 million he offered them for their shares in 1983.

He contends that the $1-billion valuation of the company on which he based his payments to other shareholders four years ago included a $250-million premium to acquire control of the firm's management--a bonus he is no longer willing to pay Smith and Clarke.

In turn, Smith and Clarke are demanding $500 million, which includes interest, on the premise that the company was worth about $3 billion in 1983, or about three times Bren's valuation.

While the objective of the trial is to determine the Irvine Co.'s fair market price at the time of Bren's acquisition, only a relatively small portion of Bren's extensive testimony dealt with the valuation issue.

Bren is arguing that the company's market value was determined by the price that other former Irvine Co. investors--including sophisticated Detroit businessmen such as shopping center developer A. Alfred Taubman, oilman Max Fisher and the late Henry Ford II--were willing to accept for their shares.

Bren repeatedly contended in his testimony that Smith passed up "the opportunity of a lifetime" when he gave her a choice of either selling her stock for the same price offered to other shareholders or doubling her percentage interest in the company.

Bren also claimed that he couldn't "understand the logic" of Smith's decision to turn down his offer. He described Smith as an unreasonable director who rejected the advice of her own lawyer in refusing to remain a shareholder after the merger.

Bren, who had become a 34% shareholder in the Irvine Co. when he joined a consortium of high-profile businessmen who bought the company in 1977, testified that as early as 1980, he began worrying about his investment.

Bren said he repeatedly complained to other directors that the company was failing to obtain necessary government approval of major new projects or to sufficiently expand its investment portfolio of income-producing shopping centers, apartments and industrial and office buildings.

Instead of following a long-term growth plan and investing in development "infrastructure" such as improved roads and sewers, Bren said, the Irvine Co. had been selling previously zoned land to builders and putting the proceeds in the bank.

In his testimony, Bren blamed Peter Kremer, the company's former president, for "focusing myopically on short-term goals when there was much bigger business to attend to."

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