• by Ross Fadner , November 7, 2003

The trial of Gruner + Jahr vs. Rosie O'Donnell appeared to shift in the defendant's direction Thursday as O'Donnell took the stand and as the judge presiding over the trial threw out key testimony from one of the plaintiff's expert witnesses.

The day's testimony also raised allegations that G+J's management may have intentionally distorted financial data and circulation estimates for Rosie magazine to avoid triggering a clause that would have allowed O'Donnell to walk away from the publishing joint venture without a penalty.

While G+J CEO Daniel Brewster denied those allegations, it proved to be a bad day in the courtroom for G+J, especially when Justice Ira Gammerman ruled that key testimony by Kenneth Collins, a partner with investment banking firm DeSilva and Phillips, was inadmissible.

Collins, whose expert testimony was supposed to illustrate the potential losses incurred by G+J due to O'Donnell's abrupt departure from Rosie magazine, was thrown out by Gammerman on the grounds that the numbers Collins was reviewing were not actually compiled by him or DeSilva and Phillips.

Collins had projected Rosie magazine would have been profitable this year, worth as much as $67 million presently and more than $88 million by 2005, had O'Donnell not walked away from the venture. The magazine lost money virtually every month it had been on the market since its inception in 2001 until it was folded.

O'Donnell's attorney Lorna Schofield, after reviewing the sources for Collins' testimony, concluded, "as far as the magazine's cash flow is concerned, your methodology is only as good as the projections given to you," to which Mr. Collins replied in the affirmative, prompting Schofield to add, "There is no testimony to the reasonableness of the numbers given to you."

Before Collins took the stand, O'Donnell's defense team finished cross-examination of G+J's Brewster, who proved to a forgetful witness, replying with vague "I don't knows' and "I don't remembers' to several pointed questions. Brewster denied the defense teams allegations that the company manipulated Rosie's circulation data to prevent its losses from climbing above $4.2 million, an amount that would have triggered the walk away clause. If true, that revelation might also have indicated that G+J intentionally violated Audit Bureau of Circulations rules for inflating magazine circulation rate base estimates to advertisers.

After a long day of questioning Brewster and senior G+J executives Dan Rubin and Kenneth Collins, the defense finally put O'Donnell on the stand.

O'Donnell spoke of her initial reluctance to enter the magazine industry-particularly because of her lack of experience and trepidation about converting a successful TV show into a print publication. She said that a couple of meetings with Brewster and other G+J senior staff calmed her fears, prompting her to eventually sign the agreement with Gruner + Jahr USA.

When asked about her discussions with Brewster over the proposed editorial management role she would play in the publication, O'Donnell replied: "As long as I had creative control-[Brewster] asked if I would be a controlling bitch like Martha [Stewart] or Oprah [Winfrey]. I said, 'they're pretty successful controlling bitches wouldn't you agree?' He laughed; that's when he still thought I had a sense of humor."

"He said he would control the business end," O'Donnell continued, adding, "I would have creative control." She did concede that brother-in-law and manager Dan Crimmins pointed out a veto clause in the contract stipulating that Brewster could veto anything he thought was "too crazy." Still, this left O'Donnell under the impression that she could present alternatives in the event of a content veto. "That's the contract I thought I was signing," she added.

When asked if she ever read the joint venture agreement, O'Donnell admitted that she did not: "I don't understand them," she said, mentioning that manager Crimmins handled contract matters. He reassured her that she would have creative control over magazine content.

The real trouble started when O'Donnell opted to bring her brother Ed O'Donnell, who is vice president-marketing for NBC, to a meeting she called to discuss the possibility of replacing Rosie publisher Sharon Sommer. Brewster, irate with O'Donnell for not giving him the heads-up, said, according to O'Donnell, "this is totally not typical. It is not corporate policy to bring a family member to a staff meeting." After the meeting, O'Donnell, hurt and embarrassed by the remarks, told her brother and the rest of her personal staff, "I cannot believe the arrogance of that man. I can't believe the way he disrespected my brother; how can we get out of this?"

Afterwards, her brother became a full-time personal advisor, recommending a new publisher who was later agreed upon by the G+J staff.

Things at Rosie magazine smoothed in the months that followed, until the infamous replacement saga of Cathy Caventer with former People magazine executive Susan Toepfer. O'Donnell conceded she was never crazy about hiring Toepfer, but reluctantly agreed with the urging of virtually everyone on the Rosie magazine board.

She was especially unconvinced of Toepfer's purported "Michael Jordan-like" editorial status after meeting with her, when each of O'Donnell's story and cover ideas were shot down by Toepfer, who suggested more mainstream celebrities like Jennifer Aniston. "Jennifer Aniston is on 19 magazine covers every month. That's not a very original idea," replied O'Donnell, suggesting further Toepfer might not be the woman for the job in light of such ideas.

O'Donnell says she only agreed to hire Toepfer because she felt everyone on the board with the exception of Cathy Caventer and Susan Ungaro (who were essentially to be replaced by Toepfer) wanted her in.

O'Donnell is expected to resume her testimony today.