BEHIND THE NEWS: After CFO’s jump to rival, Emmis opts to fight back

When Emmis Communications Corp. Chief Financial Officer Walter Berger bolted in January for the same post at CBS Radio in New York, the Indianapolis company said little publicly.

But it’s now apparent Emmis officials were more than a little peeved. In recent weeks, they’ve filed an arbitration case against Berger in hopes of recouping some of his compensation, and they’ve sued CBS alleging tortuous interference with his contract.

“I think this case is very clear-cut,” said David Barrett, vice president and corporate counsel for Emmis. “Walter was under contract with the company. CBS recruited him for some period of time. And without our consent, Walter walked away from his contract.”

Attorneys for CBS declined to comment on the skirmish. However, in a court filing this month, the company denied wrongdoing. And it said that after Berger apprised Emmis of the CBS offer, the company advised “Berger that it would not stand in the way of Berger’s opportunities.”

Berger, now 50, had been Emmis’ CFO since 1999. In his last full fiscal year with Emmis, he was the company’s third-highest-paid executive, receiving salary and bonus of nearly $700,000.

It’s not clear what he will earn at CBS Radio, a division of New Yorkbased CBS Corp. In his new post, he’ll help run a much larger business. CBS Radio operates nearly 180 stations, while Emmis runs 23.

According to Emmis’ lawsuit, filed in June in U.S. District Court in Indianapolis, CBS Radio approached Berger in the second half of 2005 about taking its CFO post. After receiving an offer, Berger alerted Emmis, which immediately contacted CBS Radio CEO Joel Hollander.

“Emmis specifically reminded [Hollander] that it had an agreement with Mr. Berger and that Emmis did not consent to Berger breaching his contract with Emmis,” according to the lawsuit.

Berger in February 2005 had negotiated a three-year contract extension that boosted his annual salary from $435,000 to $495,000 and also gave him a shot at larger annual bonuses, filings with the Securities and Exchange Commission show.

Even though Berger signed that agreement, Emmis may face an uphill battle making its legal assault pay off, said John Bator, a partner with the Indianapolis law firm Bator Redman who has experience in employmentcontract disputes.

Emmis may ring up a big legal bill pursuing its fight, he said. At the same time, the company may have a tough time making the case that Berger’s skills were so unique that it’s entitled to a hefty damage award.

“I don’t know that it’s that great a case,” Bator said, “but I don’t know all the facts.”

The legal attack may make more sense, he said, if Emmis’ ultimate aim is to send a message to rivals to keep their hands off its prized employees.

Emmis’ Barrett suggested the company is pursuing that larger goal.

“The principle here that’s really at issue is Emmis’ decision to enforce its contracts with its employees and to ensure other employers don’t poach those employees,” he said.

Emmis on Aug. 23 announced that Patrick Walsh, 39, most recently CFO of Maryland-based iBiquity Digital Corp., a developer of HD radio technology, will succeed Berger. Emmis Senior Vice President David Newcomer had been serving as interim CFO.

Challenges remain for Marsh

Think Marsh Supermarkets Inc. is out of the woods now that the Fishersbased grocery chain is set to complete its $88 million sale to Boca Raton, Fla.-based Sun Capital Partners?

A close reading of the company’s newly filed proxy statement suggests otherwise.

The proxy, sent to shareholders in advance of the Sept. 22 vote on the deal, notes that the company’s supermarket division posted a 6.9-percent decline in same-store sales in its fiscal fourth quarter, which ended April 1.

And competition is only going to get tougher. The proxy says Marsh expects as many as 17 competing groceries to open in its market area this fiscal year, including 13 operated by Arkansas-based behemoth Wal-Mart Stores Inc.

A Cleveland combination?

Here’s an intriguing idea: Suppose the two big Cleveland-based banks that operate in Indianapolis, National City Corp. and KeyCorp, combined into one.

Michael Mayo, an analyst with Prudential Equity Group, said in a report last week that the pairing makes sense, in part because they’d be able to generate big costs savings, boosting profit.

A merger would create the country’s sixth-largest bank, with $250 billion in assets.

In Indianapolis, it would create a financial institution that controlled nearly one-quarter of all deposits. According to the Federal Deposit Insurance Corp., National City’s market share is 21.1 percent, while Key’s is 3.1 percent.