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 medical 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.

His associates 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 the 92-year-old Mr. Redstone 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, the controlling shareholder of both Viacom and CBS Corp., stepped down as executive chairman of Viacom in February, 10 months after the email was sent, and was succeeded by Chief Executive Philippe Dauman.

Mr. Redstone, whose mental competency is being challenged in court, has suffered various health problems, labors to speak and often requires an interpreter. He stopped speaking on earnings conference calls in late 2014.

The April 9, 2015, email was from Adam Streisand, a lawyer who had been working at Loeb & Loeb, the firm that represents Mr. Redstone, alongside Leah Bishop, his state lawyer.

Mr. Streisand left Loeb & Loeb in March 2015 for Sheppard Mullin Richter & Hampton LLP, where he sought to represent Mr. Redstone's companions, Sydney Holland and Manuela Herzer, who wanted to protect the inheritance they expected to get from him from a possible legal challenge by Ms. Redstone.

The email was addressed to Ms. Holland and Ms Herzer. 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.

"At no time, including in April 2015, did Shari ever consider conservatorship of her father," said Nancy Sterling, Ms. Redstone's spokeswoman.

Ms. Redstone is vice chairman of CBS and Viacom and owns 20% of National Amusements Inc., which controls the media giants. Mr. Redstone owns the rest of the company.

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 in speaking, not necessarily his mental condition.

Viacom said 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, the person who would control decisions about his health care if he became incapacitated. She was replaced in that role by Viacom's Mr. Dauman.

Pierce O'Donnell, Ms. Herzer's lawyer at Greenberg Glusker Fields Claman & Machtinger, said the April 2015 email "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. 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," Ms. Sterling said.

In January, Viacom said 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 as chairman of 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, the litigation was halted as the parties held settlement talks, as reported by The Wall Street Journal.

As of Monday those talks had hit a snag, and preparations for the trial were continuing, according to people familiar with the matter. The Los Angeles Times earlier reported the hitch in the talks.

Last week, Mr. Redstone replaced Mr. Dauman with Ms. Redstone as his health-care agent, in an agreement 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 valued at 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, said people familiar with the matter.

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

(END) Dow Jones Newswires

April 13, 2016 02:48 ET (06:48 GMT)

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