Andersen & Co. Worked on Pooh Case During Shredding at Disney

by Joe Shea

The firm appeared at more than a dozen court hearings as the studio's accounting representative during that time, reliable sources close to the case now say. The full extent of Andersen's involvement in the case may never be known because Disney has asked the court to keep under seal about 200 documents from the 45-volume case file that mostly reflect accounting activity.

The Walt Disney Co., which had promised a comment Friday, did not respond.

Los Angeles Superior Court Judge Ernest M. Hiroshige has levied severe evidence sanctions against Disney for destroying 40 boxes of documents, including one marked "Winnie the Pooh, legal problems" that were shredded in 1998. The judge also levied monetary damages of $90,000 against Disney in that case.

The studio could face more sanctions for shredding hundreds of other boxes and thousands of pages of Pooh-related shipping documents of its Hong Kong manufacturing arm. A secret injunction ordering Disney to stop shredding was handed down by Superior Court Judge Ernest Hiroshige in June 2001 and only came to light when the case was unsealed in January.

At the close of a conference call for investors Thursday, Disney Chairman Michael Eisner announced that the firm would no longer use its auditors, PricewaterhouseCoopers, as outside accounting consultants but made no mention of its long relationship with Arthur Andersen & Co.

During the time that an Arthur Andersen partner supervised the lengthy accounting procedures in the discovery process for the case, at least 250 boxes of documents at Disney's Canasa Trading subsidiary were destroyed by Disney shredders, court records show.

The partner, Chris Paskatch, did not respond at Arthur Andersen & Co.'s offices in Los Angeles. John A. Donovan, the attorney representing Disney in acounting aspects of the case, also did not return a phone call requesting comment. Donovan heads West Coast litigation for the nation's largest law firm, Skadden, Arps, Slate, Meagher & Flom.

Florida licensing firm Stephen Slesinger Inc., which filed suit against the studio for allegedly cheating it of hundreds of millions in royalties, claimed in court papers released last month that an examination of remaining Canasa documents by Slesinger attorney Elisabeth Moriarty contained extensive manufacturing, distribution, licensing and royalty information about Winnie the Pooh merchandise Canasa made for sale at Disney theme parks and stores in the United States and Europe.

It is unclear whether Disney retained Andersen & Co. through 1999, when Skadden, Arps, the studio's law firm at the time, abruptly quit as Disney's counsel after working many years on the case. That unusual turn of events came about after Slesinger's attorneys sought to have Donovan called to testify against the studio about the document destruction. Rather than testify against their client, Skadden, Arps withdrew from the case, which has to be one of the most lucrative ever. More than 11 law firms and half a dozen judges have been employed in the case, which was completely under seal until Jan. 11 of this year.

Slesinger acquired a wide range of rights to the popular childen's character from British author A.A. Milne in 1930 and 1932. Merrill Lynch media analyst Jessica Reif Cohen told Forbes Magazine in March 2000 that she estimated that the Pooh characters generate $6 billion a year for Disney, about a fourth of its revenue. That money could go elsewhere if the Slesingers are permitted by a jury to terminate the contract.