Viacom CEO Philippe Dauman not only lacks the confidence of controlling shareholder Sumner Redstone, he has lost the support of the trust established to manage the empire if Redstone’s deemed incompetent, Redstone’s lawyers said today in a Massachusetts court filing. (Read it here.)
Redstone’s camp wants the state’s Probate and Family Court to reject a plea by Dauman and Viacom director George Abrams to hold an expedited trial to determine whether the 93-year-old mogul is competent to manage his affairs. The filing comes ahead of a hearing on Tuesday.
A motion to dismiss will be made within two weeks.
Dauman and Abrams specifically want to overturn Redstone’s May 20 decision to fire them from his family trust and the board of Redstone-controlled National Amusements — which has 80% of the votes at Viacom and CBS.
The duo are engaged in an “acutely self-interested” effort “to secure their tenuous positions with Viacom,” today’s filing from Redstone’s lawyers says.
But even if Dauman and Abrams win their case to have Redstone deemed incompetent, they may not be able to hold on to their jobs.
Four of the seven members of the trust he established to control his empire when he’s unable to do so “have voted to ratify Sumner’s actions. Plaintiffs are proceeding solely in their individual (and highly self-interested) capacities, and therefore lack standing to prosecute this action.”
Exhibits with the court filing show that CBS and National Amusements director David Andelman — who was seen as a potential swing vote — sided with three family representatives to remove Dauman and Abrams from the trust. He also joined three directors on National Amusements’ six-member board in voting to replace the Viacom execs.
Former Wall Street analyst Jill Krutick and National Amusements General Counsel Tad Jankowski were picked to replace Dauman and Abrams on the trust. Krutick and Redstone’s granddaughter Kimberlee Ostheimer replaced them on National Amusements’ board.
In response to the filing, Dauman and Abrams’ lawyer Les Fagen referred to one of their key arguments — that Redstone is being manipulated by his daughter Shari, who’s President of National Amusements and Vice Chair of Viacom and CBS.
“There are many undisclosed facts that will emerge concerning the conduct of Shari and her representatives,” Fagen says. “Even their own papers filed today reveal that the Trustees as stated in the affidavits have not seen Sumner for as long as ‘many years’. We look forward to a full hearing on Tuesday when we will seek expedited discovery and an independent review of the facts in order to resolve this matter as quickly as possible.”
Redstone’s court filing says that Dauman had “good reason to be concerned” about his tenure as Viacom’s stock price plummeted:
Although Sumner had long supported Dauman, his longtime friend and business colleague, against calls for his ouster, Dauman recognized that friendship would carry him only so far. Sumner had removed prior CEOs for far less, and even under the best circumstances, Sumner—then 92 years old—could not protect Dauman forever. If Dauman controlled the Trust, however, he would effectively be Chairperson, CEO, and controlling shareholder of Viacom and would be accountable to no one. At least four of the seven trustees—a majority—support Sumner’s decision to remove Plaintiffs from the Trust and National Amusement’s board.
As a result, they are “off the Trust, and off the [National Amusements] board, even if they could somehow prove the allegations in their complaint (which they cannot). Plaintiffs miscalculated not only Sumner’s resolve, but also the commitment of their fellow Trustees to do the right thing.”
The trust Redstone established says that he can only be deemed mentally incapacitated if that’s determined by “a court of proper jurisdiction,” or if three doctors agree “based on medical evidence presented to each of them as each shall deem sufficient.”
The filing includes information disclosed last night that geriatric psychiatrist James Spar examined Redstone on the days when he fired Dauman and Abrams from the trust and theater chain board, and named replacements.
Spar found that Redstone “understood and appreciated the rights, duties, and responsibilities affected by [his] decisions; the probable consequences for himself and the other persons affected by the decisions; and the significant risks, benefits, and reasonable alternatives involved in those decisions.”
Dauman and Abrams’ “bald assertion that Sumner’s ‘health and mental condition’ are ‘rapidly declining’ is simply false.”
The filing alleges that in late January, Dauman, Abrams, and Andelman — hired “a leading Boston law firm” to tell them what to do if Redstone tried to remove them,
In early February 2016, the firm rendered its advice: Although the Trust afforded Sumner almost unfettered discretion to remove and replace Trustees, the three might successfully avoid or contest removal by seeking a declaration that Sumner was incompetent and/or that he was being unduly influenced [by Shari Redstone].
… Plaintiffs therefore felt no compunction acting against Sumner’s wishes. They unceremoniously removed him as Viacom’s Chairperson. They shrugged off Sumner’s opposition to their shopping [a minority stake in] Paramount. They ignored his requests for information regarding a potential Paramount transaction, as well as longterm strategic plans (if any) for Viacom as a whole. In short, Plaintiffs treated Sumner as though he was already gone.
Redstone has asked a California court to validate his decisions against Dauman and Abrams, and says in today’s filing that the Massachusetts court is not the appropriate venue for a case. “Sumner long ago moved away from Massachusetts, and has for many years resided in California.”