CBS CBS Corp

Claims ouster is move by mogul's daughter to seize control of media companies

By Joe Flint and Amol Sharma 

The power struggle atop Sumner Redstone's $40 billion media empire intensified Monday as two longtime lieutenants ousted last week sued his daughter, accusing her of manipulating the aging mogul to stage a coup.

In their suit, filed in a Massachusetts court, Viacom Chief Executive Philippe Dauman and George Abrams, a Viacom director, are seeking to invalidate their removal from a seven-member trust that will oversee Mr. Redstone's nearly 80% voting stakes in Viacom Inc. and CBS Corp. when he dies or is incapacitated.

Messrs. Dauman and Abrams also want to be reinstated as directors of National Amusements Inc., the company that holds those controlling stakes. The men were informed of their dismissals Friday by a lawyer representing the mogul, and they quickly questioned the legitimacy of the moves and whose interests the attorney represents.

The two officials' complaint named Ms. Redstone as a defendant, accusing her of orchestrating the changes to the trust and taking advantage of her ailing, 92-year-old father. The magnate's "multi-billion dollar businesses have been seized by an estranged daughter who has manipulated her father to achieve her goals," the suit charged.

A spokeswoman for Ms. Redstone, 62 years old, had no comment on the lawsuit. An earlier statement issued on Ms. Redstone's behalf said, "It is absurd for anyone to accuse Shari of manipulating her father."

The complaint included sobering descriptions of Mr. Redstone's health. It claimed he is in "the grip of a neurological disorder" characterized by conditions such as dementia, impaired cognition and memory loss and that he is "unable to initiate or participate in meaningful conversation."

Last fall, Mr. Dauman had described Mr. Redstone as "engaged and attentive" in an affidavit supporting the billionaire in a lawsuit by his former companion, who challenged Mr. Redstone's mental competency.

Robert Kleiger, a lawyer for Mr. Redstone, filed a petition on the businessman's behalf on Monday in a Los Angeles court seeking to validate the removals of Messrs. Dauman and Abrams, arguing there is no evidence Mr. Redstone lacks capacity to make the changes.

Mr. Redstone, who turns 93 on Friday, was hospitalized within the past two weeks, people familiar with the matter say, though the reason wasn't clear. One person described the issue as minor.

The suit is the latest twist in a Hollywood saga that has included boardroom intrigue, family politics, the grievances of an ex-girlfriend and a continuing mystery over the precise condition of the man at the center of the empire.

Shari Redstone often has had limited influence in the $40 billion media empire built by her father. She was the only board member not to vote for Mr. Dauman's promotion to executive chairman, replacing Mr. Redstone. She has been estranged from her father over the years -- as recently as 2014 he tried to buy out her 20% stake in National Amusements for $1 billion but she rejected the offer. Lately, she has worked to repair the relationship.

Ms. Redstone's power and influence will grow immensely if the recent changes hold up in court. In place of Messrs. Dauman and Abrams, the trust is expected to tap Thaddeus Jankowski, a senior vice president and general counsel of National Amusements, and Jill Krutrick, a financial analyst, people familiar with the matter said. Both are close to Ms. Redstone. In addition, Ms. Redstone's daughter Kimberlee Ostheimer is expected to be tabbed for National Amusements's board of directors. Ms. Redstone also recently assumed responsibility for her father's health care.

The moves were seen by people close to Viacom as paving the way for Mr. Redstone, at Ms. Redstone's behest, to try to overhaul Viacom's board and replace Mr. Dauman as CEO, which is within the power of National Amusements.

Monday's suit alleged that the new appointees are under Ms. Redstone's control and "will illegitimately tip the balance of power to her" when control of the Redstone media empire shifts to the trust.

"Mr. Redstone is saddened that Mr. Dauman is trying to make this dispute about his daughter," Mr. Kleiger, his attorney, said in a statement. "It is about Mr. Redstone's right to have the individuals he wants and trusts managing his assets upon his death, and protecting the financial interests of his grandchildren."

As infighting goes on in Viacom's upper ranks, the company is trying to turn around its business, which includes well-known cable-television brands such as MTV, Nickelodeon and Comedy Central. The stock price is down 40% over the past year.

The legal fight creates a distraction as Viacom tries to sell a stake in Paramount Pictures, its movie studio. "Until this is resolved it creates a huge uncertainty," a person familiar with the situation said.

Mr. Redstone doesn't want to sell a piece of Paramount unless the board "presents a concrete plan that convinces him otherwise," Mike Lawrence, a spokesman who said he represents Mr. Redstone, said on Sunday.

A Jefferies LLC analyst on Monday wrote the Paramount stake sale is "essential to our buy rating" on Viacom's stock, because it would help the company reduce debt and provide cash for investment.

An executive at a company that has been exploring a bid for the Paramount stake said the events of the past few days "cause us to really rethink our interest in the asset."

Meanwhile, some investors are growing tired of the feuding and corporate dysfunction at Viacom. "There are all kinds of questions around management and governance, but not enough focus on operations and the guts of the core business," said Mike Cuggino, president and portfolio manager of Permanent Portfolio Family of Funds Inc., a Viacom investor.

CBS declined to comment on the recent events. CBS Chief Executive Leslie Moonves, unlike Mr. Dauman, has had a strong relationship with Ms. Redstone. She gave her blessing to Mr. Moonves' elevation to CBS chairman.

Two weeks ago, a Los Angeles judge dismissed a suit by Manuela Herzer, a former girlfriend and companion of Mr. Redstone who argued he was mentally incompetent last fall when he evicted her and removed her as his health-care agent.

Mr. Redstone provided a taped deposition in that case where he struggled to communicate and recall basic facts but also made clear a disdain for Ms. Herzer.

In the complaint filed on Monday, Mr. Dauman said in that affidavit in the Herzer case he "made no observations about Mr. Redstone's capacity to make significant business decisions."

He added that he visited Mr. Redstone in March and the mogul was "almost totally nonresponsive, and could not meaningfully communicate at all."

--Joann S. Lublin and Ben Fritz contributed to this article.

Write to Joe Flint at joe.flint@wsj.com

(END) Dow Jones Newswires

May 24, 2016 02:47 ET (06:47 GMT)

CBS (NYSE:CBS)
Historical Stock Chart
From Mar 2024 to Apr 2024

CBS (NYSE:CBS)
Historical Stock Chart
From Apr 2023 to Apr 2024