Huffington Haul Detailed In AOL Internal Memo

OCTOBER 15--In a new court filing, lawyers for two men suing Arianna Huffington for allegedly denying them credit and cash for their role in the founding of The Huffington Post have made public an internal document detailing exactly what Huffington pocketed following the site’s $315 million purchase by AOL.

Marked “Confidential” and “Attorney’s Eyes Only,” the February 2011 memo was prepared for AOL board members by Tim Armstrong, the company’s chief executive, and Artie Minson, the firm’s former chief operating officer. Armstrong is pictured at right with Huffington.

The 11-page document details AOL’s proposed nine-figure purchase of The Huffington Post, the deal’s strategic rationale and potential risks, and provides financial and traffic projections for the influential news site. The deal memo, prepared days before AOL announced its purchase of The Huffington Post, also reveals the “total deal consideration” for Huffington, who launched the site in mid-2005.

According to the AOL memo, Huffington, 63, received about $21 million, of which $3.4 million came in options that would vest about 20 months after the deal closed. Additionally, her employment agreement--which was then being negotiated--called for Huffington to receive another $3 million in equity grants (stock options and restricted stock units).

At the time the purchase was announced, some media reports speculated that Huffington’s piece of the deal could approach $100 million. In fact, her share amounted to less than seven percent of the sales price (and likely was less than what was earned by several of the site’s financial backers, like SoftBank Partners and Alan Patricof’s Greycroft Partners).

The deal document stresses Huffington’s critical importance to the web site, noting that her departure “could have a significant detrimental effect on the Company’s business.” Armstrong and Minson also noted that AOL was negotiating with Huffington with respect to “intellectual property rights” to her “name and personal brand.”

The AOL memo was included in a voluminous court filing made last week by lawyers for James Boyce and Peter Daou. In November 2010, the two Democratic political consultants filed a lawsuit accusing Huffington and Kenneth Lerer, her business partner, of swiping their idea for The Huffington Post.

AOL officials provided the document to counsel for Boyce and Daou in response to a subpoena request for records related to the purchase of The Huffington Post. 

While the Boyce/Daou complaint’s claims have been significantly pared down by a New York State Supreme Court judge, it has survived a pair of dismissal motions. In mid-August, Huffington and Lerer filed a motion for summary judgment. It was in response to that latest move to snuff the case that counsel for Boyce and Daou included the AOL memo as an exhibit to their opposition to the summary judgment motion.

Huffington sat last year for a videotaped deposition in the case that has been classified as confidential by her lawyers. In brief excerpts from the deposition that have been included in court filings, Huffington’s counsel objected when she was asked about her share of the site’s purchase price. Huffington’s lawyer referred to the figures as “very personal and sensitive financial information” that was not relevant to the legal claims of Boyce and Daou. (11 pages)