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Padden Got the E-Mail on AOL

10/22/2000 8:00 PM Eastern

Washington-After receiving a short electronic-mail message that divulged confidential information submitted to federal regulators by America Online Inc., The Walt Disney Co. executive Preston Padden passed it on to numerous Disney brass here and in California.

According to a 15-page Federal Communications Commission filing made by Disney's outside counsel on Oct. 13, chief Washington lobbyist Padden forwarded the message to Disney president Robert Iger, vice chairman Sanford Litvak, and nine other Disney senior employees in Burbank, Calif., and Washington D.C. Disney chairman Michael Eisner was not on that list.

Neither Padden nor the other Disney officials were authorized to see the Sept. 22 e-mail, which contained information related to AOL's proposed merger with Time Warner Inc., because none of them had signed the proper nondisclosure form.

Disney brought its lapse to the FCC's attention on Sept. 27, and the agency cut off Disney's access to the AOL records on Oct. 10. Disney has been one of the AOL-Time Warner merger's most vocal critics.

The FCC launched an investigation after AOL complained that Disney had waited an unnecessary five days before informing the agency of its error. Over that period, AOL added, Disney sent more lawyers to review additional confidential AOL records kept by its outside counsel, Wiley, Rein & Fielding.

AOL also was annoyed because Iger, Litvak and Padden are high-level Disney decision-makers who are not permitted by the FCC to obtain access to the business-sensitive information it had turned over to the agency in connection with the merger.

Disney said it took extensive action to ensure the message was destroyed. But AOL told the FCC the damage had already been done, because Padden, Iger and Litvak apparently read the e-mail with the subject line, "Important AOL Documents at Wiley Rein."

"Disney relies on the
post hoc

purging of all electronic files relating to the violation," Wiley, Rein attorney Peter Ross told the FCC on Oct. 19. "Unlike computer memory, human memory cannot be so readily deleted."

Although an AOL spokeswoman declined comment, Ross told the FCC that AOL deserved a more complete explanation from Disney regarding the events that surrounded Padden's actions.

The e-mail flap could result in administrative sanctions against Disney personnel and some of its lawyers, including Padden, who has led a hard-hitting campaign to get the FCC and the Federal Trade Commission to impose tough conditions on AOL-Time Warner merger.

The Disney law firm that generated the e-mail-Verner, Liipfert, Bernhard, McPherson and Hand-told the FCC that the e-mail contained no "competitively sensitive" information, its release had been "inadvertent and unintentional" and corrective action was "immediate and repeated."

Padden received the e-mail from a Verner, Liipfert lawyer who had permission to review the AOL documents. Lawyer Larry Duncan sent the e-mail to Padden and his assistant, Marsha MacBride, on the mistaken belief that both had signed the nondisclosure forms.

Had Disney disclosed the Sept. 22 breach immediately, as FCC rules require, AOL could have barred Disney lawyers from a second review of the online provider's documents Sept. 27.

Verner, Liipfert attorney Lawrence Sidman, who responded for Disney, told the FCC that AOL's allegations of foot-dragging were "baseless, offensive, and quite possibly libelous."

The FCC received a copy of the page-and-a-half-long e-mail-which summarized 12 AOL documents out of hundreds-but the agency declined to make it public.

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Affinia Manhattan, New York, NY