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A federal judge dismissed a shareholder lawsuit Tuesday against CBS Corp. (CBS) for allegedly failing to take a goodwill-impairment charge in timely fashion in 2008 in order to personally benefit Viacom Inc. Chairman Sumner Redstone.
In an order Tuesday, U.S. District Judge P. Kevin Castel in Manhattan dismissed the lawsuit, which had been seeking class-action status.
"I conclude that the plaintiffs have failed to allege that the defendants committed acts of securities fraud," the judge said.
The judge did give the plaintiffs until April 30 to file a motion to amend the lawsuit.
The lawsuit, filed in December 2008, alleged that CBS violated U.S. securities laws by failing to take an impairment charge to its goodwill in the first quarter of 2008 in order to improperly inflate the value of its shares, including CBS shares held by National Amusements Inc., which Redstone controls.
In October 2008, the company said it would take a pretax noncash impairment charge of about $14 billion in the third quarter to reduce the carrying value of goodwill, intangible assets related to FCC licenses and investments.
The complaint had alleged Redstone, who chairs both Viacom's and CBS's boards of directors, had borrowed $1.6 billion on behalf of National Amusements and the loan covenants required significant principal payments if the value of CBS or Viacom shares fell below a certain level.
By the time CBS took the impairment charge, an overall decline in the stock market had driven the stock prices of CBS and Viacom below the levels specified in the loan covenants, requiring Redstone to sell CBS shares held by National Amusements in order to pay creditors, the lawsuit had alleged.
The complaint also had alleged false and misleading statements by CBS and its executives about the true nature of the company's financial health prior to taking the charge.
CBS was spun off from Viacom in 2006.
In a statement, CBS said it was "pleased with the decision."
A lawyer for the City of Omaha, the Nebraska Civilian Employees' Retirement System and the City of Omaha Police and Fire Retirement System, the lead plaintiffs in the case, declined comment Tuesday on the decision.
The lawsuit had sought to represent a class of investors who purchased CBS stock between Feb. 26, 2008, and Oct. 10, 2008.
-By Chad Bray, Dow Jones Newswires; 212-227-2017; email@example.com