Liberty's Malone criticizes Diller in court

— -- Liberty Media Chairman John Malone criticized IAC/InterActiveCorp CEO Barry Diller on Monday for reaping more than $1 billion in compensation as the Internet and media company lost value.

"Since 2000, they have lagged seriously behind the Nasdaq and other indexes," Malone said.

Diller plans to split IAC into five parts, each with a single vote per share. Malone wants a two-tier structure to maintain his control.

Liberty holds 30% of IAC's shares and about 62% of its voting power. But Diller controls the voting rights of Liberty's IAC shares through a proxy agreement, which Malone is challenging.

Diller's plan to split the company is "a breach of the stewardship that we granted him at the start of this relationship," Malone said.

"He believed that it was his company," Malone testified. "He frequently refers to it as his business."

IAC says that Liberty's attempt to remove directors is invalid and that Diller may vote Liberty's shares of IAC without Liberty's permission.

Diller and Malone have worked together since 1995. Malone testified Monday that he holds "no ill will" for Diller despite the litigation.

"We both have hurt ourselves a little bit" by having the dispute end up in court, Malone told Lamb.

The relationship soured after Liberty hired Greg Maffei as chief executive in early 2006, Malone said.

Shortly after Maffei arrived, Malone testified, Liberty began looking for ways to circumvent the proxy agreement and gain control of IAC.