CBS CBS Corp

By Keach Hagey 

Associates of media mogul Sumner Redstone were worried as far back as April 2015 that if Mr. Redstone's health condition became public, Viacom Inc. would have to remove him as a director and stop paying him, according to an email sent by a former lawyer for the firm that represents Mr. Redstone.

They were concerned the mogul might make negative statements about his daughter, Shari Redstone, in a magazine interview. That, they feared, could spur her to seek to have him declared incapable of handling his own financial affairs, and set in motion a corporate governance overhaul at Viacom, according to the email, which was reviewed by The Wall Street Journal.

Mr. Redstone, 92 years old, stepped down as executive chairman of Viacom in February, 10 months after the email was sent, and he was replaced by Chief Executive Philippe Dauman. The correspondence raises new questions about his health in the intervening period.

Mr. Redstone has suffered various health problems, labors to speak and often requires an interpreter. He stopped speaking on earnings conference calls in late 2014. He remains the controlling shareholder of both Viacom and CBS, with nearly 80% voting stakes.

The email was written on April 9, 2015, by Adam Streisand, an attorney who had been working at Loeb & Loeb, the firm that represents Mr. Redstone, alongside attorney Leah Bishop, who continues to serve as Mr. Redstone's estate lawyer.

Mr. Streisand left Loeb & Loeb in March 2015 for Sheppard Mullin, where he sought to represent Mr. Redstone's companions, Sydney Holland and Manuela Herzer, who wanted to protect the inheritance they were expecting to get from Mr. Redstone from a possible legal challenge from Ms. Redstone. At Sheppard Mullin, Mr. Streisand was cooperating with Ms. Bishop.

The email was addressed to the two women. It recommended that they not sit in on an interview that Mr. Redstone planned to give Vanity Fair, and refrain from pushing him to say during the interview that he was estranged from his daughter.

"I spoke with Leah," Mr. Streisand wrote, referring to Ms. Bishop. "Let me just report what she told me, then I'll tell you what I recommend...The main concern by Viacom/Leah et al. is that if Sumner shames Shari publicly that Shari will seek to establish a conservatorship over Sumner. If she does that, then his current condition will become public, and Viacom will have to remove Sumner as an officer/director and stop paying him compensation."

Ms. Bishop, Loeb & Loeb and Ms. Holland didn't respond to requests for comment.

In a statement, Shari Redstone said the threat that Mr. Streisand raised was misplaced. "At no time, including in April 2015, did Shari ever consider conservatorship of her father," said Ms. Redstone's spokesman, Nancy Sterling. Ms. Redstone is a vice chair of CBS and Viacom and owns 20% of National Amusements Inc., the company that controls the media giants. Mr. Redstone owns the rest.

It is possible, according to people familiar with the matter, that the reference to "his current condition" in the email was a reference to his physical condition and extreme difficulty speaking, not necessarily his mental condition.

Viacom says it was unaware of the email's existence. "No one at Viacom has any knowledge about this correspondence, or knows or has ever spoken to this individual," said Viacom spokesman Carl Folta.

In the end, Mr. Redstone didn't criticize his daughter during the magazine interview.

In November, Ms. Herzer filed a lawsuit saying he lacked mental capacity when he threw her out of his mansion and removed her as his health-care agent. She was replaced as the health-care agent, who controls health-care decisions in the event Mr. Redstone becomes incapacitated, by Viacom's Mr. Dauman.

Pierce O'Donnell, Ms. Herzer's lawyer at Greenberg Glusker Fields Claman & Machtinger, said the email from April 2015 "is another smoking gun that proves conclusively that there has long been a cover up by Shari and the lawyers about Sumner's lack of mental capacity."

Ms. Redstone's spokeswoman, Ms. Sterling, said in a statement that Mr. O'Donnell's claim is "blatantly false" and said Ms. Redstone never saw the email. "As of the April 2015 email date, Holland and Herzer were still involved in Sumner's life, and Shari and her family were prevented from receiving any meaningful information regarding Sumner, or having access to him," the statement said.

In January, Viacom announced that it had cut Mr. Redstone's pay by 85% in fiscal 2015, to $2 million down from $13 million, citing his reduced responsibilities. Mr. Redstone stepped down from his chairman role at both Viacom and CBS just days after a geriatric psychiatrist hired by Ms. Herzer examined his mental health.

A trial in the case is set for May. Last week, litigation was halted as the parties held settlement talks, The Wall Street Journal reported. As of yesterday, those talks hit a snag, and preparation for the trial is continuing, according to people familiar with the matter. The Los Angeles Times earlier reported the snag in the talks.

Already, several of the issues raised in the course of the settlement talks had been resolved, according to people familiar with the matter.

Last week, Mr. Redstone replaced Mr. Dauman with Ms. Redstone as his health-care agent, an agreement made separate from the settlement talks. And Ms. Herzer, who was originally set to get about $70 million in cash and real estate in Mr. Redstone's will before it was rewritten in the wake of her departure, was set to get $30 million plus a Carlyle Hotel apartment worth about $5 million, all tax-free, according to people familiar with the matter.

The depositions of Ms. Redstone and Mr. Dauman, which had been called off last week due to settlement talks, are being rescheduled, according to people familiar with the matter.

Write to Keach Hagey at keach.hagey@wsj.com

(END) Dow Jones Newswires

April 12, 2016 17:05 ET (21:05 GMT)

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