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.
New trustees are expected to be named as soon as Monday,
including Thaddeus Jankowski, the general counsel of National
Amusements, and Jill Krutick, a Redstone family friend and
financial analyst, according to a person familiar with the
matter.
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's stock 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. Mike Lawrence, a new spokesman purporting to represent
Mr. Redstone, said that is false.
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.
Mr. Redstone believes that Paramount should remain fully owned
by Viacom, unless the board "presents a concrete plan that
convinces him otherwise," his spokesman Mr. Lawrence said in a
statement Sunday night.
"Viacom's false and unfair statements to the media, as well as
Mr. Dauman's opportunistic claims of incapacity, now make it
problematic to move forward with any direct meeting," the statement
said. He remains intent on receiving a briefing through
advisers.
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." Mr. Lawrence said Ms. Redstone didn't play a role in the
hiring of the new law firm.
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."
Mr. Redstone's spokesman said the letter was an ignored request
for direct engagement. "As Viacom knows well, Mr. Redstone has
significant speech impairment and, for much of the past two years,
has not relied on verbal statements at board meeting to make his
opinion known."
Joann S. Lublin contributed to this article.
Write to Keach Hagey at keach.hagey@wsj.com and Joe Flint at
joe.flint@wsj.com
(END) Dow Jones Newswires
May 23, 2016 03:15 ET (07:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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