Questions About Redstone's Health Re-Emerge in CBS Battle

(Bloomberg) -- Questions about Sumner Redstone’s health are once again front and center as lawyers for CBS Corp. and the billionaire’s company prepare for a trial in their wrestling match over control of the U.S.’s No. 1 prime-time TV network.

CBS wants a Delaware judge to bar National Amusement Inc. from offering testimony about Redstone’s role in fighting directors’ efforts to strip his family of its controlling interest in the media company. A hearing is set for Wednesday.

The directors, led by Chief Executive Officer Les Moonves, say 95-year-old Redstone’s health problems are so acute that he is “incapable of communicating his views” about a dilution plan designed to slash the Redstone family’s voting control to 17 percent from 79 percent . Moonves is also under investigation for sexual harassment claims and has been accused by the Redstones of destroying evidence in the dispute.

This view of Redstone’s condition is based, in part, on a company director’s secret recording of a conversation with the billionaire, according to CBS’s court filings. Redstone is said to communicate mostly through grunts and an iPad preprogrammed with his voice to say yes, no and a profanity.

NAI declined to comment on CBS’s request to the judge. Sara Evans, a spokeswoman for NAI, said last week the recording was illegal under California law. “NAI raised serious concerns about this,” she said.

In a filing unsealed Tuesday, NAI’s lawyers said they shouldn’t be prevented from providing testimony about Redstone’s or other executives’ intentions in connection with keeping control of CBS without subjecting the ailing billionaire to questioning. It would be wrong to “force a nonagenarian who they admit is in poor physical health to sit for deposition’’ against his doctors’ orders, NAI’s lawyers said.

It isn’t the first time Redstone’s declining health has been targeted in a dispute about his status as controlling shareholder of both CBS and Viacom Inc., owner of cable networks MTV and Comedy Central and movie studio, Paramount Pictures.

Former Viacom CEO Philippe Dauman and other directors who sued Redstone in 2016 for booting them from the board unsuccessfully asked the same judge hearing the CBS case to order the billionaire to undergo mental-capacity testing.

In another lawsuit filed by a former lover, a California judge threw out challenges to Redstone’s competency after the businessman testified on videotape that he wanted her “out of his life.”

Redstone moved into a non-voting role on CBS’s board in 2016 and was succeeded by Moonves. The billionaire also stepped down from Viacom’s board in February 2017. Shari Redstone, his daughter, has taken over day-to-day control of NAI and also holds a CBS board seat. She and Moonves have battled for months over whether CBS and Viacom should merge.

NAI’s lawyers noted in their filing that between 2006 and 2015, Moonves and others “sought to purchase NAI’s voting control of CBS, at a substantial premium.” Shari Redstone has indicated in other court filings the family would be open to offers for a merged CBS-Viacom entity.

CBS also issued a subpoena Tuesday to AT&T Inc. demanding documents about any communications the telecommunications provider has had with Shari Redstone and Moonves about a “potential merger, combination or other strategic transaction” involving the media company or Viacom.

CBS directors contend Shari Redstone sought to force a CBS-Viacom merger over their objections while turning up her nose at other deals, such as a potential combination of CBS with AT&T. Executives of AT&T have denied they were interested in a CBS merger.

Self-Serving

In the Delaware Chancery Court case, the media company’s lawyers accuse NAI of seeking to offer “self-serving testimony” showing Redstone opposed the stock-dilution plan.

NAI disclosed in a pretrial exchange of information that Redstone participated by telephone in a May board meeting, according to CBS’s court filing. NAI officials say he voted in favor of changing CBS’s bylaws to require the approval of 90 percent of directors for a special dividend diluting the family’s dominant interest.

It would be unfair to let NAI cite Redstone’s backing for the bylaw change because there’s no way for CBS’s lawyers to verify the accuracy of the statements, CBS said. “The NAI parties are trying to have it both ways: claiming Mr. Redstone is participating in NAI board meetings and this litigation while asserting health issues to shield him” from questioning, CBS said.

The media company’s executives pointed to a January videotape of a chat between Redstone and his longtime friend, Arnold Kopelson, to buttress their concerns about the billionaire’s ability to communicate. Kopelson, a film producer whose credits include Best Picture Oscar winner “Platoon,” made the video to “memoralize Mr. Redstone’s physical state,” according to court filings.

CBS and NAI agreed to let Judge Andre Bouchard review the tape and documents laying out Redstone’s NAI ownership stake, behind closed doors “out of concern for Mr. Redstone’s personal privacy,” according to the filing.

If Bouchard won’t bar NAI from using documents allegedly showing Sumner Redstone backed his firm’s defensive efforts, then CBS should be allowed to submit written questions to him, CBS said.

“No litigation or corporate dispute is worth jeopardizing a witness’ health, and it’s not the CBS parties intention to do so,” the company said. “The CBS parties appreciate the serious nature of Mr. Redstone’s medical condition.”

NAI officials noted in their filing that Kopelson never explained why he believed he needed to document Redstone’s health and recorded the billionaire in his California home without consent. They added Shari Redstone was “furious” at the CBS director’s “grievous invasion of privacy and assault on her father’s dignity.”

The case is CBS v. National Amusements Inc., No. 2018-0342, Delaware Chancery Court (Wilmington).

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