CBS Accused of Ditching Evidence in Redstone Control Fracas
CBS Accused by Redstones of Ditching Evidence in Control Fight
(Bloomberg) -- CBS Corp. executives are being accused of destroying evidence in a corporate battle with the family of billionaire Sumner Redstone for control of the media company by using self-destructing texts to communicate.
Officials of Redstone’s National Amusements Inc. allege in a Delaware Chancery Court filing that “relevant evidence has already been destroyed” through CBS’s executives use of TigerText, an iPhone application that can delete messages immediately after being read.
CBS said in a statement it used TigerText for “cybersecurity reasons following the Sony Corp. hack.” The communication software “was not developed or used for any nefarious or sinister communications as some have alleged,” the company said.
The unsealed filing is the latest twist in the clash between Les Moonves, CBS’s chief executive officer, and Shari Redstone, president of the dominant shareholder National Amusements, over Moonves’s move to strip the family of its control of America’s No. 1 prime-time TV network. The Redstone family owns controlling interests in both CBS and Viacom.
The allegations come a day after CBS directors decided to keep Moonves in the CEO role while the board investigates sexual-harassment claims against the 23-year company veteran. A half-dozen woman accused Moonves of forced touching and kissing during business meetings. Directors are planning to hire an outside law firm to probe his conduct.
A trial is set for Oct. 3 in Wilmington over whether the CBS board had the power to approve a dilution plan that reduced the Redstones’ voting control of the media company to 17 percent from 79 percent.
Because of health issues, Redstone has yielded the main role in the control fight to his daughter. The 95-year-old billionaire has had issues speaking for years and is said to communicate through a pre-programmed computer.
CBS officials noted in another unsealed filing Tuesday that Arnold Kopelson, a CBS director, videotaped Redstone during a January visit to “memorialize Redstone’s physical state.” The recording infuriated Shari Redstone and led her to push to have Kopelson ousted from the media company’s board, according to the filing.
Sara Evans, a spokeswoman for National Amusements, or NAI, said the recording was “illegal” under California law. “NAI raised serious concerns about this,” she said. But NAI did not ask for Kopelson to be removed from the CBS board and instead made it clear that it would not vote to reelect him at the annual meeting, she said.
CBS officials are asking Judge Andre Bouchard to either bar NAI officials from testifying about Sumner Redstone’s position on the fight over the dilution plan or to allow them to depose him before the trial begins.
While gathering information for the upcoming trial, NAI officials said they learned CBS’s senior management and its in-house lawyers had been using TigerText for business communications since November 2015, according to the filing. They used it while still using their regular CBS accounts for other communications, NAI says.
The app allows the sender to set an expiration time for a text, giving the user the ability to have it deleted upon reading. It prevents the receiver from forwarding or storing the text message, which makes it a good app for cheating spouses, according to an 2010 Time magazine article.
How NAI discovered use of the self-destroying texts is blacked out in the filing, along with other information. The allegations about CBS’s conduct were originally filed under seal July 23 and made public Tuesday.
“Once confronted, the CBS parties acknowledged the use of the self-destructing message system,” NAI’s lawyers wrote in the filing. The media company’s officials are refusing to impound electrical devices on which the TigerText app was used and hand over other information about their use, NAI says.
NAI wants Bouchard to order CBS officials to preserve electronic devices used to send a receive the texts and related documents. The Redstones want access to that information to prepare for the trial, according to the filing.
To back up its contentions, NAI relied on Austin Berglas, a former FBI cyber security expert, who said that in his 19-year career, he hadn’t “personally observed a single company that employed an ephemeral messaging application such as TigerText for legitimate business communications by senior executives or in-house counsel.” He noted CBS didn’t deploy the messaging application in a manner that would’ve enhanced its overall cybersecurity protection.
Michael Ross, a New York lawyer who specializes in legal ethics, said lawyers and clients are legally obligated to preserve evidence and can face sanctions, including fines and dismissal of cases, for destroying evidence relevant to disputes in court.
Failure to protect evidence “undermines the legal process” and makes it difficult for parties to get a fair hearing, said Ross, who teaches ethics at Brooklyn Law School and Yeshiva University’s Cardozo Law School.
The case is CBS v. National Amusements Inc., No. 2018-0342, Delaware Chancery Court (Wilmington).
To contact the reporters on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net;Nabila Ahmed in New York at nahmed54@bloomberg.net;Lucas Shaw in Los Angeles at lshaw31@bloomberg.net
To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Paul Cox, Joe Schneider
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