UPDATE 1-Liberty CEO says questioned Diller's hold on IAC

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By Michele Gershberg

WILMINGTON, Del., March 11 (Reuters) - Liberty Media Chief Executive Greg Maffei on Tuesday said he and Chairman John Malone disagreed for more than a year about whether they could wrest control of IAC/InterActiveCorp from mogul Barry Diller.

But that didn't stop Maffei from making his case to Wall Street in private discussions, saying Diller's right to vote Liberty's controlling 62 percent stake was not ironclad, Maffei told a Delaware court. Liberty owns about 30 percent of IAC, but has voting control through a class of super-voting shares.

The proxy agreement between Liberty and IAC (IACI.O: Quote, Profile, Research, Stock Buzz) Chairman and CEO Diller is at the heart of a trial between the companies in Delaware Chancery Court. They are fighting over Diller's proposal to reconfigure IAC by spinning off four of its main units in a way that would dilute Liberty's voting power over the businesses.

"When asked the question of whether that proxy was irrevocable or not, I tried to maintain the position that there were arguments under which that proxy could be revoked," Maffei told the court under questioning from IAC's lawyer, Marc Wolinsky of Wachtell, Lipton, Rosen & Katz.

Maffei said he had maintained that position in discussions with analysts and investors, though the company did not make the idea public in a regulatory filing.

Maffei also acknowledged that Malone did not agree with the idea, which stemmed from a review of the original control agreements forged between Liberty's chairman and Diller.

He was called to the stand by IAC, which has stressed a history of personal disagreement between Maffei and Diller as a key factor in the unraveling ties with Liberty. Liberty has argued that it aims to preserve the value of its IAC holding after years of seeing the shares lag the Nasdaq.