It was a day that Michael Eisner would undoubtedly like to forget. Sitting in a Los Angeles witness box for four hours last week, the usually unflappable chairman of the Walt Disney Co. struggled to maintain his composure. Eisner' s protégé turned nemesis. Jeffrey Katzenberg, his former employee, was seeking $500 million in his breach-of-contract suit against Disney, and Eisner was trying to defend his--and his company' s integrity. At one point Eisner became flustered when Katzenberg' s attorney, Bertram Fields, asked if he recalled telling his biographer, Tony Schwartz,' I think I hate the little midget.' Later Eisner recalled that the same day, he had received a fax from Katzenberg meant for Fields, thanking the lawyer for 'managing' a magazine story that praised Katzenberg at Eisner' s expense: 'I said to Schwartz, 'Screw that. If he is going to play this disingenuous game... I simply was not going to pay him his money.'' Last week' s revelations were the latest twist in a dispute that has entertained Hollywood and tarnished Disney' s corporate image. The dash began five years ago, when Katzenberg quit Disney after a 10-year reign as studio chief, during which he oversaw production of such animated blockbusters as 'The Lion King'. Disney' s attorneys said that Katzenberg forfeited his bonus—2 percent of profits in perpetuity from all Disney movies, TV shows and stage productions from 1984 to 1994, as well as their sequels and tie-ins--when he left. The company ultimately paid Katzenberg a partial settlement of nearly $117 million, sources say. But talks broke down over how much Disney owed, and the dispute landed in com. Industry insiders never expected that Disney would push it this far. The last Hollywood accounting dispute that aired in public was Art Buchwalds' lawsuit against Paramount for profits he claimed to be owed from the 1988 Eddie Murphy hit 'Coming to America'. Paramount chose to fight Buchwald in court—only to wind up paying him $l million after embarrassing revelations about its business practices. After that, studios made a practice of quietly settling such claims. But Disney under Eisner would rather fight that settle. And he and Katzenberg are both proud, combative types whose business disagreement deepened into personal animus, So far, Disney' s image—as well as Eisner' s—has taken a beating. In his testimony last week Eisner repeatedly responded to questions by saying 'I don' t recall' or 'I don' t know'. Katzenberg, by contrast, offered a stack of notes and memos that appeared to bolster his claim. (The Disney executive who negotiated Katzenberg' s deal, Frank Wells, died in a helicopter crash five years ago.) The trial has also offered a devastating glimpse into the Magic Kingdom' s business dealings. Internal documents detail sensitive Disney financial information. One Hollywood lawyer calls a memo sent to Katzenberg from a former Disney top accountant 'a road map to riches' for writers, directors and producers eager to press cases against Disney. The company declined requests to comment on the case. The next phase of the trial could be even more embarrassing. As Katzenberg's profit participation is calculated, Eisner will have to argue that his animated treasures are far less valuable than Katzenberg claims. No matter how the judge rules, Disney will look like a loser. At the end of the first paragraph, the pronoun 'r' in the quoted sentence 'I said to Schwatz, ... 'refers to ______.