COUNTDOWN: Who breached first?

This story first appeared in the November 11, 2003 issue of WWD. Subscribe Today.

As the trial of Rosie O’Donnell and Gruner + Jahr wraps up in New York State Supreme Court, that’s the question that will ultimately decide who wins the case and who, if anyone, takes the money.

In court Monday, O’Donnell’s lawyers attempted to prove that G+J breached the joint venture agreement by violating a non-disparagement clause in its contract with O’Donnell and by inflating the financial performance of the magazine to keep her from walking away.

It was a bad day for G+J.

In the morning, O’Donnell’s lawyers called G+J spokeswoman Sue Geramian and — relying on a series of depositions, e-mails and newspaper articles — ripped into the company’s press strategy, asking whether Geramian had made company employees available to reporters in an attempt to take the dispute public before O’Donnell even resigned, effectively folding the magazine.

“I may have,” Geramian finally admitted.

How many reporters were given access to employees?

“I don’t know, maybe half a dozen,” Geramian conceded after grueling questioning.

And that wasn’t even counting the e-mail between G+J chief executive officer Dan Brewster and one media reporter, in which Brewster said he couldn’t discuss the dispute but that the reporter should call editor Susan Toepfer, as well as two other G+J employees, whom Brewster named in the e-mail as “obvious contacts” and whom he said might speak to the reporter.

In cross, Geramian said none of this began until she suspected O’Donnell’s publicist of leaking information to the press first. The plaintiffs’ lawyers, however, didn’t seem to have a smoking gun to prove that, though there were some damaging reports on G+J during the summer of 2002, when the dispute took place.

Later in the day came charges of “managed financials.” These weren’t anything new — lawyers for O’Donnell have said since the opening of the trial that G+J cooked the books in order to prevent her from exercising an escape clause in her contract — but G+J’s nebbish chief financial officer Larry Diamond did not help the company’s case.

On the stand, Diamond seemed to have a wide grin on his face as the defense attorneys grilled him. Perhaps it was nerves, but his responses didn’t help.

“Isn’t it a fact that you managed the financials such that you wouldn’t fall below the required threshold? That was one of the decisions that was made, was it not?” Matthew Fishbein, a lawyer for O’Donnell, asked.

“Yes, sir.”

“And the reason was so that you could continue to publish Rosie Magazine, isn’t that correct?”

“We felt it was desirable to continue to publish Rosie Magazine as I’ve stated earlier,” Diamond responded.

The defense also called Michael Lavery, the president of the Audit Bureau of Circulations, who reluctantly said G+J violated the rules of the ABC by purposefully inflating Rosie’s newsstand sales.

Depositions and e-mails from Diane Potter, director of consumer marketing, laid that out unequivocally, as she explained to colleagues how they should overestimate the numbers so as not to lose their advertising.

“We were concerned that if Rosie’s newsstand sales were so low compared to what we’d seen previously, that if we reported them accurately, the advertising community would react so negatively, that the magazine would be in great difficulty,” she was quoted in a deposition.

Of course, ABC numbers aren’t “financials” per se, but the defense was using them to build its case.

At the end of the day, O’Donnell’s lawyers called an independent auditor who said G+J’s financial projections on the title at the end of June 2002 were off by $500,000. If true, by his calculations O’Donnell had $9,000 worth of wiggle room to get out of her contract, which stipulated the magazine’s losses could not be more than $4.2 million for the first six months of 2002. G+J has claimed losses were around $3.7 million. But cross-examination was just beginning on the witness when court adjourned. The final installment comes Wednesday and sources continued to say at press time that a last-minute settlement was unlikely. — Jacob Bernstein

RATHER LATE: People are once again asking “What’s the frequency, Kenneth?” A couple of weeks ago, Vanity Fair organized a photo shoot of CBS’ “60 Minutes” team, past and present. Everyone who’d ever appeared on the program was scheduled to appear and, miraculously, according to a source, they all did. They even arrived on time. Leslie Stahl, Diane Sawyer, Andy Rooney — so on and so forth. All, that is, but Dan Rather.

When Rather arrived about an hour late, Rooney called him on it, according to the source, saying, “It’s been fun waiting for you.” As a hello-to-you-too, Rather replied, “If that’s the way you’re going to be…” At which point he stalked off and, according to the source, had to be retrieved by another person on the set.

A CBS spokeswoman denied that Rather threw a snit. He apologized profusely, she said, and noted that Rather was late because of a scheduling error in his office. “It wasn’t his fault,” she said. — J. B. and Greg Lindsay

BRIEFLY NOTED: Ellen Levine and William Kerr are this year’s lifetime achievement winners at the Magazine editors’ hall of fame awards and Henry Johnson Fisher awards, respectively. Levine has been the editor of Good Housekeeping since 1985. Kerr is the chief executive of the Meredith Corp.

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