Gloves come off as IAC trial begins

Malone accuses Diller of being 'reckless'

By DADE HAYES

The mutual sniping of recent weeks heated up Monday, the first day of testimony in Delaware Chancery Court, as John Malone accused Barry Diller of being a reckless steward of InterActiveCorp.

Malone, head of Liberty Media and a major shareholder in Diller's IAC, asserts that Diller's proposal to split the company into five pieces is unacceptable, especially coming from someone he claims is incapable of running the company responsibly.

"He frequently refers to it as his business," griped Malone. He later added that Diller is "extremely well compensated" and made a "fine art" of taking advantage of the corporate jet.

Diller didn't have a chance to fire back in court, but on Monday morning he sent an email to employees asking them to ignore the media reports and assuring them that this court battle is "purely a business dispute."

But it's a dispute that few media observers ever expected to reach trial. Malone and Diller have known each other for more than 20 years and have done business together in several arenas, starting with TV's QVC shopping channel in the 1990s. While they have disagreed over the direction of their various efforts, they've never escalated to this level.

In Monday's testimony, Malone also claimed a high level of vitriol between Diller and Liberty chief exec Greg Maffei. According to Malone's testimony, Diller told him that Maffei, a onetime Microsoft biggie, was a "poor choice" to run Liberty. Malone said that, in return, Maffei adopted a "pugilistic" stance in trying to erode Diller's control of IAC, a disparate array of Web assets Diller began building more than a decade ago.

Liberty owns 30% of IAC but controls 62% of voting rights under a dual-share structure, though control is left to Diller under an agreement. Malone's complaint is that Diller violated that agreement by pushing his breakup plan against Liberty's will.

The breakup would return Liberty's control to 30% by eliminating the dual-share setup.

Malone called that plan "a breach of the stewardship that we granted him when we started this whole relationship. ... It's a breach of faith."

The trial is expected to wrap up by week's end, with Vice Chancellor Stephen Lamb expected to render judgment two to three weeks thereafter. Diller and Maffei are likely to testify.

Diller girded the troops for battle in the email that greeted IAC employees Monday morning.

"The media has not surprisingly become enchanted with this dispute," Diller wrote, "so I expect a fair amount of press coverage during the process attempting to paint the trial as going one way or the other. Please do your best to ignore it. I will try as well but probably fail.

"At the end of the day, it's purely a business dispute. We are highly confident in our legal position and are looking forward to proving our case to the judge. But, whatever the outcome, you have much to be proud of. And no one, including those seeking to dramatize this dispute with generic and often wrongheaded characterizations of our company, can or should take that away from you."

Read the full article at:
http://www.variety.com/article/VR1117982161.html

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