Chief to Review Sealed Data on Theater Dealings : Chris-Craft Wins Ruling on Warner Document

A Delaware judge ruled Friday that Warner Communications must turn over a sealed report of an internal probe to Chris-Craft Chairman Herbert J. Siegel, who controls a 17% voting stake in Warner and serves on the Warner board.

With the ruling, Siegel appears to win the most recent round in his long-running feud with Warner.

But Warner Vice President Geoffrey W. Holmes claimed the victory for his company, saying, “We won a confidentiality Warner Communications Warner Communications fidentiality agreement. We didn’t contest him getting the document. . . . We just don’t believe this information is for business purposes.”

At issue is a 663-page document concerning the company’s dealings with the now-defunct Westchester Premier Theatre in Tarrytown, N.Y.

Several organized crime figures were convicted of skimming profits in the 1970s and driving the theater into bankruptcy. Federal prosecutors alleged that a bribe was paid to certain Warner officers to induce the company to invest $250,000 in the theater in 1973. In the early 1980s, one Warner official was convicted and two others pleaded guilty to charges stemming from the bribery-kickback scheme.

The internal investigation began in 1978, after Warner’s audit committee hired Michael Armstrong, an independent lawyer who once led the Knapp Commission’s investigation of New York city police corruption, to conduct a probe.

Armstrong soon recommended that a complete investigation await the end of the government trials and inquiry, however.

In 1985, prosecutors said they had closed their long investigation of Warner Chairman Steven J. Ross, and in May, 1986, the Warner board voted to seal Armstrong’s report after accepting a summary of its contents from two audit committee members, who found that “no present officer was implicated in the Westchester Premier case,” according to Holmes.

Siegel voted to seal the document last year, Holmes said.

But last week, Siegel sued Warner after he sought the document in April and May without success. Friday’s ruling, by Chancellor William T. Allen, allows the Chris-Craft Chairman to show the document to lawyers from two firms “solely in connection with seeking legal advice concerning his conduct as a director of Warner.” If Siegel wants to share the information with anyone else, he must obtain the court’s permission after a hearing where Warner would have the opportunity to respond.

Chris-Craft came to Warner’s rescue in early 1984, when media magnate Rupert Murdoch appeared to threaten an unwanted takeover. Chris-Craft sold Warner 42.5% in a broadcasting subsidiary in exchange for about 19% of Warner’s voting stock.

Almost from the outset, Ross and Siegel clashed over various management practices, and began searching for a way to untangle their interests.

According to Warner, Siegel’s lawsuit was filed last week after Warner spurned a Chris-Craft offer to sell its Warner stake back to the company for about $45 per share, at a time when the stock was trading at about $30.