Viacom CEO, Director File Suit to Block Changes to Redstone Trust--Update
May 23 2016 - 1:44PM
Dow Jones News
By Joe Flint
Viacom Inc. Chief Executive Philippe Dauman and George Abrams, a
director at the media giant, filed a lawsuit against Vice Chairman
Shari Redstone, challenging their dismissals as stewards of $40
billion media empire built by her father Sumner Redstone.
The lawsuit, filed Monday in Massachusetts probate and family
court, seeks to invalidate their removal from a seven-member trust
that will oversee Mr. Redstone's nearly 80% voting stakes in Viacom
and CBS Corp. when he dies or is incapacitated. It also seeks their
reinstatement as directors of National Amusements Inc., the company
that holds those controlling stakes.
Messrs. Dauman and Abrams were informed of their dismissals late
Friday by a lawyer claiming to represent the mogul. They quickly
contested the legitimacy of the move, questioning the lawyer's
relationship to Mr. Redstone.
In the complaint, Messrs. Dauman and Abrams accused Ms. Redstone
of being behind the changes to the trust and taking advantage of
her ailing, 92-year-old father to make a power play to assume
control of his media holdings.
The mogul's "multibillion-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 didn't immediately respond to a
request seeking comment about the lawsuit. An earlier statement
issued on Ms. Redstone's behalf denied that she has taken advantage
of her father. "It is absurd for anyone to accuse Shari of
manipulating her father," the statement said.
The complaint included sobering claims about the state 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."
Robert Kleiger, a lawyer for Mr. Redstone, filed a petition on
the mogul's behalf Monday in a Los Angeles court seeking to
validate the removals of Messrs. Dauman and Abrams. The petition
said no court has made a determination that Mr. Redstone lacks
capacity and no such medical evidence has emerged.
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 tapped for National Amusements's board of
directors.
The complaint alleged that those expected 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.
As infighting goes on in Viacom's upper ranks, the company is
trying to turn around its business, which includes well-known cable
TV brands like MTV, Nickelodeon and Comedy Central. The stock price
is down 40% over the past year.
The company has been looking to sell a stake in Viacom's movie
unit Paramount Pictures by June.
This is the second time in a month that a court will be asked to
determine Mr. Redstone's mental capacity and whether he has been
under undue influence of those around him.
Earlier this month, a Los Angeles judge dismissed a suit brought
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. The judge dismissed the suit without
ruling on Mr. Redstone's mental competence. After that case was
dismissed, Ms. Herzer followed up with a suit against Ms. Redstone,
alleging undue influence over Mr. Redstone.
In an affidavit in the Ms. Herzer case last fall, Mr. Dauman
described Mr. Redstone as "engaged and attentive." But in the
complaint Monday, Mr. Dauman said that in the earlier affidavit, he
"made no observations about Mr. Redstone's capacity to make
significant business decisions."
He added that he visited with Mr. Redstone in March and the
mogul was "almost totally nonresponsive, and could not meaningfully
communicate at all." Mr. Redstone's deposition in the Ms. Herzer
case "demonstrated a severe loss of comprehension and a seriously
diminished mental capacity, " Monday's suit said.
The often bad relationship between Ms. Redstone and her father
also is detailed in the suit as proof that it was never his
intention to leave her control of his assets.
"Shari had various roles at [National Amusements], Viacom, and
CBS, but ultimately did not meet her father's high standards for
managing those businesses," the suit said.
--Joann S. Lublin contributed to this article.
Write to Joe Flint at joe.flint@wsj.com
(END) Dow Jones Newswires
May 23, 2016 13:29 ET (17:29 GMT)
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