CBS CBS Corp

By Keach Hagey 

Months of tension over the fate of Sumner Redstone's $40 billion media empire erupted into open warfare over the weekend, as two of the mogul's longtime lieutenants were told they were removed as stewards of his holdings in Viacom Inc. and CBS Corp.

Late Friday, a lawyer claiming to represent Mr. Redstone informed Viacom Chief Executive Philippe Dauman and Viacom director George Abrams that they had been dismissed from the seven-member trust that Mr. Redstone set up to manage his nearly 80% voting stakes in the two media companies when he dies or is incapacitated. He said they also were removed from the board of National Amusements Inc., the family holding company that owns the stakes.

Mr. Dauman and Viacom quickly challenged the legitimacy of the dismissals, questioning the lawyer's relationship to the mogul. They said that Mr. Redstone, who turns 93 Friday, lacked the mental capacity to make such decisions himself, and was being manipulated by his daughter, Shari Redstone, who they alleged is angling for control of National Amusements and Viacom.

"These steps are invalid and illegal," a spokesman for Mr. Dauman said in a statement. "They are a shameful effort by Shari Redstone to seize control by unlawfully using her ailing father Sumner Redstone's name and signature." The spokesman said Mr. Redstone would never have summarily dismissed the two men, "his trusted friends and advisers for decades."

Mr. Abrams said in a statement, "the Sumner Redstone I knew would never have taken this action."

People familiar with the matter expect the dismissals to be contested in court in coming days.

Ms. Redstone, vice chairman of Viacom and CBS and a member of the trust, said Saturday through a spokeswoman, "I fully support my father's decisions and respect his authority to make them."

Ms. Redstone didn't respond to a request for comment on the allegations of manipulating her father.

Two weeks ago, a California judge dismissed a lawsuit filed by Mr. Redstone's former companion, Manuela Herzer, that challenged his mental competency. Mr. Redstone's profanity-laced deposition persuaded the judge that he wanted Ms. Herzer out of his life, but the transcript revealed his extreme difficulty communicating and his inability to answer some basic biographical questions. The judge didn't rule on Mr. Redstone's mental capacity.

If Mr. Dauman challenges Mr. Redstone's competency in court, he would have to argue that the decline of the mogul's mental state was precipitous and relatively recent. Last fall, in an affidavit in the case involving Ms. Herzer, Mr. Dauman said that Mr. Redstone had been "engaged and attentive" in recent meetings. Ms. Herzer described him as a "living ghost."

The maneuvering increases the uncertainty about the future control of Viacom, home to cable channels like MTV, Nickelodeon and VH1, as well as the Paramount Pictures film studio. It also raises questions about the security of Mr. Dauman's job as Viacom's CEO, given that the lawyer claiming to represent Mr. Redstone attributed Mr. Dauman's removal from the trust to worries about Viacom's performance. The company'sstock has fallen 40% over the past year.

Removing Mr. Dauman would be a big victory for Ms. Redstone, who has clashed with the executive in the past. She was the lone Viacom board member who didn't vote for his promotion to executive chairman in February, replacing Mr. Redstone in that role.

After Mr. Redstone's death, control of Viacom and CBS would rest with the trust, and if Ms. Redstone had enough votes on her side, she could influence everything from the composition of the companies' boards to how they respond to merger-and-acquisition overtures.

Recently Ms. Redstone, who has at times been estranged from her father, has worked to repair their ties. She is now his health agent, putting her close to his daily activities.

Tensions began to escalate within the Redstone empire's power structure in recent weeks, though people familiar with the situation differ on the reasons and on what Mr. Redstone's wishes are.

Mr. Redstone has grown frustrated that Viacom's board and management didn't take account of, among other things, his disapproval of Mr. Dauman's plan to sell off a minority stake in Paramount Pictures and his annoyance at being abruptly demoted from executive chairman of Viacom in February, said some people familiar with the matter. Last week, Viacom's board voted to stop paying Mr. Redstone, again angering him, they said.

Frederic Salerno, Viacom's lead independent director, said the lack of communication went both ways, and contributed to the board's decision. He said he and other directors had been denied a face-to-face meeting with the mogul.

"We took this action based on his complete lack of communication with the Viacom board and management team and his silence during recent board meetings, as well as recent public disclosures raising concerns about his health," Mr. Salerno said in a statement.

A Viacom spokesman alleged that Ms. Redstone has put Mr. Redstone's "residence on lockdown," blocking the board's access to her father.

Some people familiar with the situation said it is Mr. Redstone's lawyers, not Ms. Redstone, who are behind his failure to meet with Viacom directors.

When Viacom directors tried to contact Mr. Redstone after the recent competency trial, his lawyers told them to wait until a corporate counsel was in place.

Rob Klieger, an attorney at Hueston Hennigan who represented Mr. Redstone in the Herzer lawsuit, said he facilitated Mr. Redstone's hiring of Michael Tu of Orrick, Herrington & Sutcliffe as corporate counsel.

Early last week, Messrs. Salerno, Dauman and Abrams received a letter from Mr. Redstone via Mr. Tu's firm expressing the mogul's concerns about the sale of the Paramount stake and Viacom's performance.

Mr. Tu said Saturday that Mr. Redstone acted to remove Messrs. Dauman and Abrams from the trust after receiving no response from them.

A Viacom spokesman challenged Mr. Tu's legitimacy in representing Mr. Redstone, saying he was "previously unknown until this week to anyone associated with Sumner other than Shari Redstone."

The Viacom spokesman also disputed Mr. Tu's statement that board members didn't respond to Mr. Redstone's concerns, saying that Mr. Redstone was on the phone during an "in-depth strategy session of Viacom's board Tuesday evening and all day Wednesday."

The spokesman added, "Not a sound was heard from Sumner, who was connected by phone. Shari Redstone, also connected by phone, did not raise a single concern during the board session on any topic."

--Joe Flint and Joann S. Lublin contributed to this article.

(END) Dow Jones Newswires

May 22, 2016 20:40 ET (00:40 GMT)

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