October 6, 2004 10:40 AM PDT

In court, Ellison gets 'Genghis Khan' hearing

WILMINGTON, Del.--Former PeopleSoft CEO Craig Conway testified Wednesday that he tried to "vilify" Oracle and its top executive as part of a plan to block the hostile takeover proposed last year.

"My strategy was to vilify the offer," Conway told a Delaware court during a free-ranging and sometimes humorous session that showed how he viewed Oracle CEO Larry Ellison when the database giant launched its takeover bid in June 2003. Oracle went to court Monday in an effort to challenge takeover defenses that Conway put in place at PeopleSoft. The case is being heard in Delaware Chancery Court.

In a response to a question from an Oracle attorney about his invocation of the term "sociopath," Conway replied, "I was referring to Oracle as a sociopathic company. I don't believe I ever called Larry Ellison a sociopath." But Conway acknowledged writing an e-mail at the time in which he called Ellison "every name in the book."

Conway, who was fired last week by PeopleSoft's board and who once worked for Ellison, defended having compared his former boss to the warlord Genghis Khan. "He himself draws comparisons between himself and Genghis Khan," Conway said. "He had a book on his desk about Genghis Khan."

That prompted the judge to joke, "He doesn't eat raw meat from under your saddle, does he?"

While the exchange drew chuckles from courtroom observers, Oracle is hoping to use its interrogation of Conway to make a more serious point: that PeopleSoft's executives and board did not have the best interests of the software company's shareholders in mind when rejecting the bid before having a chance to consider it carefully.

In further questioning, Oracle took aim at Conway's credibility, trying to portray him as an executive whose personal pique at Ellison led him to reckless exaggeration about the negative impact the purchase could have.

A presentation that PeopleSoft prepared for states such as Ohio, Minnesota, Michigan and California predicted higher costs to each government if the acquisition were to take place. Ellison said publicly that "we will take care of upgrade options," but PeopleSoft's slides said "no upgrades" and warned that no new features and no new products would be forthcoming if the merger were to take place. The presentation urged each state to "use its influence to compel the DOJ to act."

Conway said that far from manufacturing that fear, the company was hearing it from customers and industry analysts. "We were attempting to convert unrest into action."

In an e-mail message cited Wednesday, Anna McPherson, a PeopleSoft public-relations representative, told Conway and perhaps others, "I don't think we should highlight the negative impact to customers. That will scare prospects."

The Delaware case, which is expected to last two weeks, represents Oracle's attempt to eliminate a so-called poison pill defense that would effectively block any hostile takeover of PeopleSoft.

PeopleSoft's poison-pill strategy would make a hostile takeover bid prohibitively expensive, because it would release a flood of additional shares to the market, making it difficult or impossible for an acquirer to purchase all the shares needed to gain a controlling stake in the company. This strategy is one of the few remaining obstacles to the acquisition, after the Department of Justice's bid to block the deal failed.

 

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