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E! Networks CEO Quits Amid Probe

Mindy Herman, the subject of complaints of abuse of power, leaves with a $20-million stock payout.

May 28, 2004|Sallie Hofmeister | Times Staff Writer

The president and chief executive of E! Networks, Mindy Herman, resigned Thursday in the wake of an investigation into complaints that she abused her power and created a climate of fear.

Comcast Corp., the cable giant that controls E!, released a statement praising Herman's leadership and said she would remain on board to help with the transition to a new chief. Herman, while not addressing the investigation, said in a statement that she had set the channel on a sound course and would now focus on her infant son.

Comcast's quiet preparations to end Herman's four-year reign at E! seemed to catch the 42-year-old executive by surprise, sources said. Herman gathered 20 to 30 of her top lieutenants early Thursday morning in the network offices on Wilshire Boulevard and disputed a story about her in The Times.

The story said the departure was imminent because her heavy-handed management style and sense of entitlement had created deep resentments within the company.

"I'm not going anywhere," she said, according to sources.

By afternoon, however, her resignation was announced.

"We have accomplished essentially everything that we set out to do when I joined E! Networks," Herman said in a statement. "With the recent birth of my son, it is a once-in-a-lifetime opportunity for me to spend a little more time with my family and to pursue other entrepreneurial interests."

Comcast last year launched an investigation and a subsequent audit of E! Networks after receiving two anonymous letters that complained of wrongdoing by Herman, sources said. An E! Networks spokeswoman said Herman always acted appropriately during her tenure.

Among the complaints were allegations that Herman improperly allowed company funds to be used for a lavish baby shower last fall, attended by about 150 staffers. After learning about the letter, Herman wrote a check for nearly $8,000 to reimburse the company for the costs of the event, a network spokeswoman said.

Herman also used a redecorating program on the Style network to turn a bedroom in her Malibu home into a nursery for her newborn. An E! spokeswoman said Comcast approved of her role in the program, which ran several thousand dollars over its $2,000 budget. Comcast would neither confirm nor deny whether it had given its approval.

Other complaints about Herman were less serious -- but still unflattering.

At one E! party for the launch in 2002 of "The Anna Nicole Show," Herman got into a fistfight with a female subordinate in the parking lot of a Hollywood burlesque club, according to several witnesses.

Herman will leave with a stock payout of $20 million, according to insiders. Herman's employment contract called for her to receive 1% of the increased value that E! Networks achieved during her tenure.

E! Networks, a Los Angeles-based cable programmer, which includes E! as well as the Style network, is worth nearly $4 billion, according to Merrill Lynch & Co., up from $1.9 billion when Herman arrived in March 2000.

At the same time, however, E!'s ratings have been shaky. Its yearly average 24-hour ratings have declined from 2000 through 2003. In the first five months of this year, ratings were up 14% over the same period last year.

Some media industry insiders say the flap over Herman is a black eye for Comcast, which enjoys a wholesome image as a tightly managed family-run operation.

Comcast has been well regarded on Wall Street, although a failed $50-billion takeover bid for Walt Disney Co. this year damaged the company's stock. Part of Comcast's pitch to Wall Street was that it could turn around troubled Disney assets like ABC because of its management acumen. But some Disney executives say the embarrassing end to Herman's tenure also casts a dim light on Comcast's ability to manage creative enterprises.

Comcast sources said Herman's mandate at E! was to shake up and streamline a workforce that, one source said, "was complacent." One top executive said Herman achieved the goals that Comcast had set for her because she had improved the value and profitability of the company.

"We are very happy about the growth of E!," said David Cohen, a Comcast senior vice president. "The network has much more focus. She put together a great team."

E! is co-owned by Comcast and Disney, but Comcast oversees personnel and day-to-day operations.

Many E! Networks employees were gleeful Thursday that Herman would be leaving.

But her stock payout, detailed in The Times, upset many current employees. It also angered many of the at least 150 men and women who either have lost their jobs under Herman or saw their positions reduced from staff posts to temporary assignments -- a designation that stripped them of benefits but helped improve the company's bottom line.

"We should all get raises if they can afford to pay her that kind of money," one staffer said.

Some former E! employees said the $20-million payout was particularly unfair because Herman, they said, degraded the image of the flagship channel by ushering in lowbrow, tabloid fare such as "Celebrities Uncensored" and "It's Good to Be."

E!'s habit in recent years of bashing and embarrassing the stars has led to a boycott by several big names, including Will Smith, George Clooney, Renee Zellweger, Kelly Ripa, Kelsey Grammer and Halle Berry. As a result, the channel has been banned from the red carpet of several movie premieres over the last year, including "Gothika" and "Cold Mountain."

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