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Disney Barred From Merger Documents

October 10, 2000

WASHINGTON (AP) _ The Federal Communications Commission barred The Walt Disney Co. and its lawyers Tuesday from looking at any confidential documents related to the America Online-Time Warner merger until the company sets stricter safeguards against breaches.

``We are concerned by the apparent laxity in procedures used by Disney and its counsel that resulted in the disclosure of the confidential material,″ wrote Deborah Lathen, chief of the FCC’s cable service bureau, in making its decision.

Disney has been one of the most vocal opponents of the proposed deal between AOL and Time Warner _ the largest corporate merger in U.S. history.

The FCC’s action follows from an incident reported by Disney last month in which an associate attorney in the company’s firm sent an e-mail containing a description of material covered by a protective order to in-house counsels who were not covered by confidentiality agreements.

Disney acknowledged the breach five days after its occurrence to the FCC. AOL has sought an investigation of the incident.

On Tuesday, Disney’s firm _ Verner, Liipfert, Bernhard, McPherson and Hand _ insisted that the breach was inadvertent and did not reveal information that would pose competitive threats to AOL.

``This was one e-mail transmission with the most cursory summary of a number of documents,″ said Larry Sidman, a partner with the firm. ``It was a fluke. It did not reflect any laxity of procedures. We intend to comply and cooperate fully with the commission and its inquiry.″

AOL declined to comment.

The agency’s cable bureau, which is overseeing the merger review, directed Disney to provide by Friday additional information explaining how the breach happened, what steps were taken to remedy it and why it took several days for it to be reported to the commission.

Following an investigation, the bureau said it would determine what sanctions are appropriate. In the meantime, Disney and its counsel are prohibited from viewing confidential documents until they provide the FCC with measures to ensure that future breaches of the court order do not occur.