The Keys to the Kingdom (43 page)

The result was that Eisner was suffering through humiliating problems with Euro Disney and Disney's America—not to mention the loss of a trusted aide like Okun—and Katzenberg was agitating. And possibly Eisner started to scent betrayal. When the editorial staff of the
Wall Street Journal
invited Katzenberg to address them at a lunch, he accepted. Eisner ordered him to cancel.

 

IN THE EARLY
1990s, Eisner had become increasingly enamored of Peter Rummell, the head of the company's real-estate-development unit. Rummell was the kind of smooth, presentable executive that Eisner was
increasingly coming to favor; as a former Imagineer remembers, he “wore a suit very well.” And through Rummell, Eisner met leading architects and indulged his passion for building. “Michael became a kind of modern-day Medici patron and he liked doing that,” says Pat Scanlon, a former senior vice-president in Imagineering.

The Imagineers blamed Rummell, whom they inevitably nicknamed “Rommel,” for promoting the shopping and housing developments that were supposed to sit adjacent to their theme parks. They held him partly responsible for the glut of overpriced hotels at Euro Disney and for convincing Eisner to expand the plans for Disney's America. They thought that building hotels, aligning roads, and putting utility lines in the right places—the jobs handled by Rummell's unit—were pretty simple propositions compared with designing thrilling new theme-park attractions. The Imagineers felt that the predictability of those processes not only appealed to Eisner after the struggles he had encountered within the parks, but made Rummell's operation look good compared with the more chaotic Imagineering.

In 1993, Eisner put Rummell in charge of Imagineering. He was already strongly disliked by many in the division, who joked that he seemed to hate theme parks, perhaps because of some unfortunate childhood incident. In 1994, he ordered major layoffs that were handled with little tenderness. “It was a bad sign when you came to a desk with empty cardboard boxes,” one former Imagineer remembers. “Guards were hired to wait while you cleared out your desk.”

Mickey Steinberg, the division chief, left for Sony, where a number of his colleagues followed him. Disney reacted to these departures with hostility. “There was literally a memo that forbade people from communicating with people at Sony,” says an Imagineering insider. “If you bumped into somebody at a trade show, you had to fill out a report of the contact and what the conversation was about.”

Dave Fink, who was among those who went to Sony, has the bitterest of feelings in the wake of what he considers the reckless expansion and subsequent demolition of the Imagineering unit. “I think Michael Eisner would shoot himself—literally—if he knew what his reputation was,” he says. “He thinks he has remained above all the damage and harm he has done. The fact is, he has treated thousands of people like shit and he is the cause of almost all of it…. Do you know how many lives were absolutely screwed over? Those were all as a result of bad decisions at the highest
level of that company…. People would say the guy's a maniac when it comes to thinking through what his decisions do.”

 

BY THE END
of fiscal 1993, the problems at Euro Disney had hit Disney's bottom line. The Walt Disney Company's net income had dropped precipitously from $816.7 million to $299.8 million, mostly because of a $514.69 million loss on Euro Disney and a related $371.5 million accounting charge. For the first time since he had arrived at Disney in 1984, Eisner took no bonus. Euro Disney had dragged the company's return on equity to 6 percent—below the 11 percent minimum that contractually entitled him to a payment.

In October, Disney suggested that its European theme park's $3.75 billion debt had to be cut by $2 billion. Disney would kick in a billion dollars in cash and deferred fees but said the banks who had loaned money for the park would have to share the cost of restructuring the rest. “The banks were shocked,” says a former top Euro Disney officer. But they shouldn't have been. A reporter asked one of the French bankers why Disney's revenue projections had been so readily accepted when the financing was arranged. “Disney was a magic name,” he replied.

“They had a formidable image and convinced everyone that if we let them do it their way, we would all have a marvelous adventure,” lamented a top French banker.

In December, Euro Disney reported that it had lost $1.03 billion in less than two years since it had opened.

That year, Eisner wrote the most levity-free letter to shareholders that he had ever devised. He acknowledged that Disney was confronting its “first real financial disappointment.” Based only on financial criteria, he conceded, Euro Disney barely deserved a D on the company's report card. “Some would call it dreadful and, in a financial sense, I would be forced to agree,” he wrote. But Eisner said the park and hotels were “great.” There would have to be a restructuring in which Disney's partners would “bear their fair share” of the burden. Whatever happened, he concluded, Disney would “take no action to endanger the health of Disney itself.”

In January 1994, Disney signaled that it was willing to play hardball when Eisner told a French magazine that if a deal wasn't cut by March 31, he would consider facing a bankruptcy or even shuttering the park. “If the engine of an airplane falls out in full flight, what are the options?” Eisner
asked his interviewer. “Anything is possible today, including closure.” Disney also moved up its deadline for resolving its differences with the banks to March 15, when Euro Disney was scheduled to have its annual meeting.

Negotiations with the banks got under way in February. In the first session, a lawyer for the banks stunned Disney by stating that the banks intended to prove “a detailed pattern of fraud” with respect to the park. Disney counsel Sandy Litvack, who was representing the company, was enraged. After demanding an apology, he walked out of the meeting. Within a couple of days, the banks asked him to return to the table.

As the park continued to lose a million dollars a day, the bankers insisted that they were fed up with Disney's overbearing style. “The Walt Disney group is making a major error in thinking it can impose its will once more,” a leading French banker told the
Wall Street Journal
. But really, the banks had to do what they could to keep Euro Disney alive. If the park went bankrupt or closed, their losses would only deepen dramatically.

Wells oversaw the restructuring negotiations. “Frank was much more attuned than Michael to the issues that the Euro Disney executives had of legal liability and fiduciary responsibility,” says a former Disney executive who played a key role in the negotiations. “He would be more sympathetic to us saying, ‘We can't do that,' as opposed to Michael saying, ‘Do it.'”

In the midst of this brutal exercise, Wells decided to tag along on a ski trip with his friends Roland Betts and Tom Bernstein from the Silver Screen partnerships. They stayed at Betts's house in Santa Fe. Betts remembers that Wells woke up each morning at five o'clock and talked on the phone to Europe for two or three hours. By eight, he would emerge from his room in his underwear and say, “Let's go.” All day on the chairlifts, Wells mulled over the puzzles presented by Euro Disney. By four-thirty or five
P.M
., he returned to the house and started talking to Eisner for an hour or more. “Michael was much tougher to deal with and intransigent about settling,” Betts remembers. Wells emerged from these conversations exhausted.

“He said he made a promise to Luanne that he would have only one glass of wine at dinner,” Betts says. “I said, ‘Okay.' I got a glass and he said, ‘Not that one,' and pointed. I said, ‘Frank—that's a vase.'”

On March 14, 1994, a deal was announced. Euro Disney and the bankers agreed to a restructuring of $1 billion in debt. The banks forgave all interest payments for sixteen months and deferred payment of principal for three years. Disney, which had cut itself in on annual management fees from the
European park, agreed to waive payment from 1992 to 1998. After that, it agreed to cut those fees from 6 percent to 1 percent of net revenue (gradually building its rates back to 6 percent). Disney also forgave $210 million that it was owed by the park for various services and made a low-interest loan to Euro Disney.

Just as that deal was gelling, Saudi prince al-Waleed bin-Talal bin-Abdulaziz al-Saud, a thirty-seven-year-old Disney fan, agreed to pay $247 million to buy shares in a billion-dollar rights offering that was part of the bailout package. Disney negotiated by satellite with the prince. As the parties neared an agreement, Eisner popped in a last-minute demand: the prince would also have to make a low-interest $100 million loan to Euro Disney to construct a convention center that was planned but still not built.

Not only were the prince's advisers stunned by Eisner's audacity, but even Richard Nanula, the chief financial officer, feared that Eisner had blown the deal. But the prince agreed. When it was all done, Disney's stake in the European park had been cut from 49 percent to 39 percent. The park would continue to be hampered by its debt and the obligation to resume payment of fees to the Disney company. But even though the picture would not brighten for shareholders, the immediate crisis was over for Eisner and Wells.

A few weeks after his visit with Betts, Wells called to say that he was sending a plaque reading “The Euro Disney debt was restructured in this room” for Betts to hang at his house in Santa Fe. He also told Betts that he was leaving for an Easter weekend helicopter-skiing trip to the Ruby Mountains in Nevada. “Why don't you come along?” he asked.

Betts declined. “I don't like helicopters,” he said.

 

WELLS HAD GATHERED
an eclectic group for this trip. His old buddy Clint Eastwood was there, as was Wells's thirty-one-year-old son, Kevin. And Wells had been especially pleased to see Dick Bass. Wells had invited daredevil documentary filmmakers Mike Hoover and Beverly Johnson, a married couple whose work often appeared on CBS News. Avid climbers, Hoover and Johnson were part of a large circle that congregated every year in Sun Valley, Idaho, for the Wells Cup, a downhill race that Wells organized with his wife. Given the thrill-seeking and even reckless nature of some of Wells's friends, the race had become a pretty serious com
petition. But it was followed by an evening of revelry, song, and skits, masterfully emceed by Wells. It was the kind of event that Wells loved, combining physical challenges with good fellowship.

Bass hardly ever made it to the Wells Cup ski competition, so it meant a lot to Wells that he had come along on this trip to Nevada. “It was fabulous,” Hoover remembers. “The two of them together, joking around, Bass telling incredible stories, both of them laughing.”

Typical for Wells, the trip included an element of adventure. There were no towlines or chairlifts for Wells and his friends. Helicopters transported them to the remote slopes of Thorpe Creek Canyon, where they would be able to cut trails on untouched powder.

The trip had started auspiciously with good weather and good skiing. The second day started out fine, too. As soon as the group reached the top, Wells took off downhill. Eastwood followed but he could see only the track that Wells had left. As he shussed down the snowy slope, Eastwood suddenly heard an alarming cry pierce the silence. Concerned, he picked up speed. As he caught up to Wells, he realized that the awful noise was merely his friend's fractured rendition of the Beatles classic “Hey, Jude.”

After the first run, visibility worsened and the helicopters stopped flying. Instead, the skiers had to be hauled in groups on lumbering Sno-Cat vehicles. Several members of the party, including Eastwood, quit for the day. As the tractor made the long climb, Bass entertained the group with songs and poetry.

By the afternoon, the weather had cleared enough for the helicopters to be used to bring the skiers back from the slopes. The first carried away Dick Bass and several others. Mike Hoover and Beverly Johnson said they would stay for a while, suggesting that they might ski and hike back to the lodge if the weather turned again and a second helicopter couldn't pick them up. Wells liked the idea of the hike but the guide discouraged the group, explaining that they would face a long and difficult walk. In normal conditions, the helicopter could cover the same distance in less than five minutes. Hoover, Johnson, and Wells agreed to wait for the second helicopter. Kevin Wells wanted to stay, too, but Frank said no. “We shouldn't ride on the same helicopter, you know,” he explained. Kevin left and the guide, Paul Scannell, stayed.

 

THE HELICOPTER ARRIVED
shortly after three
P.M
. and Wells, Scannell, Mike Hoover, and his wife clambered aboard as the weather closed in. By the time pilot Dave Walton took off, visibility was so poor that the route the first helicopter had taken was no longer navigable. Walton chose a different course and flew over a ridge hoping to make his descent. But the canyon was shrouded in fog. “We're going to have to land and wait this out a little bit,” Walton told the others. No one minded: they expected a brief stop. But about forty minutes dragged by and conditions didn't improve. Hoover felt crowded and got out of the helicopter for some air. The afternoon grew colder and Walton turned on the ignition to warm the engine and his passengers. They sat for about twenty more minutes.

Finally the visibility improved and they took off. A moment later, Hoover, seated in the back, looked over the pilot's shoulder and noticed that warning lights on the control panel were illuminated. He heard Walton radio that there was engine trouble. Everything seemed normal—no unusual sounds or frightening dips—but Hoover knew that Walton was going to attempt an emergency landing. He told his wife, seated in front of him on the opposite side of the craft, to brace herself. Johnson, herself a seasoned helicopter pilot who had flown rescues in Yosemite, glanced at the panel and saw that her husband was right. Then Hoover turned to Wells, who was beside him. “The engine went out on this thing,” he yelled. “We're going to go in, so brace yourself.”