ALONG WITH “NEVER STOP DECORATING your office” (or you've overstayed your welcome) and “Never refuse to work with anyone” (since you may need that person tomorrow) comes that other show-biz adage “Never leave a paper trail” (because it may come back to haunt you). The latter explains why Hollywood has so little institutional memory: because so much can be hidden as long as nobody writes anything down. And when someone does, it's steamy, as if opening an air pocket into a mogul's parboiled soul.

Now some Disney private communications have become newly public and demonstrate the disturbing degree to which chairman/CEO Michael Eisner protects his public image from the prying eyes of the news media. He even has a pet name for the way he measures potential company disasters by employing the “Disney and MDE embarrassment equation” (with “MDE” standing for Michael D. Eisner), according to court papers obtained by the Weekly.

Consider this excerpt of a memo he wrote Disney's then-president, Michael Ovitz, in the midst of the decision to fire him, urging him to “deal with the public relations brilliantly . . . to say and write only glowing things . . . Nobody ever needs to know anything other than positive things from either of us.”

But now everyone will.

Lawyers for a major shareholder suit against Disney will get to grill Eisner about these pronouncements because, on February 6, a Delaware court (Disney is a Delaware company) cleared the way for discovery on a 5-year-old lawsuit challenging Ovitz's gargantuan 1996 severance package. (Full disclosure: I am in a legal dispute with Disney over the news media's right to truthfully report on the entertainment giant's business activities.)

Yes, unbelievably Eisner is still on the hot seat for helping Ovitz cash out under a no-cause clause after only 14 months of Mickey Mouse employment. You'd think, after so much time, no one would give a damn. But you'd be wrong.

The plaintiff's lawyers still care because they'll pocket big fees if they win. Critics of extravagant corporate compensation still care because it's one of their biggest caterwauls. Hollywood denizens still care because it's one of those continuing mysteries. How could superagent Ovitz get hired amid such unabashed hosannas and then fired in less time than it takes to make a movie? How could übermogul Eisner reach out to his best friend, then retreat more alone at the helm than ever?

In today's reality, such public failure finds answers only in courtrooms.

By the end of April, depositions will be taken of 1995 and 1996 Disney corporate officers and board of directors, including Eisner and Ovitz, who'll relive that most painful period. If made public, their answers will attract the news media the same way that chum lures sharks — because there's blood in the water.

Today, Eisner continues as Disney's Teflon Tyrant, while Ovitz, down and out after blaming the “gay mafia” for his downfall, describes himself as “retired” from show biz. (His biggest deal recently? Arranging Marty Scorsese's speaking appearance at Brown University.)

GRANTED, THE STUFF BEING LITIGATED is so labyrinthine that you gotta L'Ovitz. But, back then on the morning of August 19, 1995, when Ovitz's hiring was announced from Eisner's airy office at the Michael Graves-designed Team Disney headquarters in Burbank, the pair of executives seemed like two pals pledging the same fraternity. But my own reporting found that, just 10 days after Ovitz arrived on October 1, 1995, Eisner had headaches.

First, with the six personal assistants Ovitz wanted to bring with him to Disney. (Eisner had only three.) Then with a staggering $1.7 million renovation of a corporate office which Ovitz insisted had to be humongous, even if it meant pushing out an exterior wall. (It became bigger than Eisner's.) When Ovitz demanded that someone in the Rotunda's kitchen be assigned to cook just for him, Eisner's response — his eyes bulging, the veins in his neck throbbing, according to an eyewitness — was to run down the hall into the office suite of his two most trusted advisers, Sandy Litvack and Steven Bollenbach, both of whom had vigorously opposed Ovitz's hiring.

“Who is this guy?” Eisner sputtered. “Where does he think he is? Why is he doing this? What is wrong with him?”

Fast-forward to court papers showing that one year later, on October 8, 1996, Ovitz sent a handwritten note to “my best friend” Eisner that oozed with self-pity.

“After my conversation with Sandy and the many subsequent discussions with you, it seems to me that you would be much happier if I were not with the company. To that end, I guess I should try to explore other possibilities, particularly the one [Sony] you and I have discussed,” the note said. “I will try to do this in the next few weeks. If I cannot, then I guess you are stuck with me until I can find something to do that works for both of us . . . As you said, we need to do this together and put the right face on it.”

A day later, Eisner wrote back to Ovitz:

“I read your note, and I really appreciate the spirit in which it is written . . . I agree with you that we must work together to assure a smooth transition and deal with the public relations brilliantly. I am committed to make this a win-win situation, to keep our friendship intact, to be positive, to say and write only glowing things from either of us . . . Nobody ever needs to know anything other than positive things from either of us. This all can work out! You still are the only one who came to my hospital bed — and I do remember.”

At the time, both Eisner and Ovitz were continuing to lie to the news media that they were still The Dream Team. Ovitz began desperately trying to negotiate a five-year, $100 million deal to run Sony's U.S. entertainment assets (which would also reimburse Disney's financial obligations to him), but couldn't close the transaction. Disney had to decide whether to keep Ovitz or dump him. The rest, as they say, is infamy.

Since his firing, in books and magazine articles and TV interviews, the two Michaels now agree that Ovitz was a failure at his job. So, as a journalist who covered Ovitz's tenure at Disney from his arrival to departure, I've always been puzzled why Disney didn't just pay Ovitz chump change to get rid of him.

My notes show that, at the same time Disney made the formal announcement that Ovitz was out as president after the close of the stock market on December 13, 1996, at about 1:30 p.m. PST, a top company executive was telling me that the severance amount for Ovitz still hadn't been finalized, but that it looked to be only a $10 million payment. “You have to consider the whole status in terms of, did he resign or was he fired?” the insider said.

Only one person knows why Ovitz's payment ballooned to $140 million. So this current litigation questions Eisner's loyalty: Whom did he put first, the company or himself? As for Disney's board of directors: Whom did they put first, the shareholders or Eisner?

If you want to contact Nikki Finke, e-mail her at deadlinehollywood@gmail.com.

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