CBS Judge Questions Redstone's Mental State Ahead of Court Fight

(Bloomberg) -- The judge who will decide whether CBS Corp. directors can strip Sumner Redstone of his controlling interest in the media company has expressed concerns about the ailing billionaire’s mental capacity and his ability to participate in efforts to block the move.

CBS directors, led by Chief Executive Officer Les Moonves, say the 95-year-old Redstone’s health issues have worsened to the point that he is incapable of communicating his views about a plan designed to slash the Redstone family’s voting control from 79 percent to 17 percent.

While Delaware Chancery Court Judge Andre Bouchard refused to order Redstone to submit to pretrial questioning by CBS lawyers about his understanding of the dilution plan and efforts to oppose it, the judge said he had serious questions about the billionaire’s mental abilities.

“Nobody has formally made a competency determination,’’ Bouchard noted at a hearing Wednesday in Wilmington, Delaware, according to a transcript. “But I had concerns, and I’ve had concerns for some time about that.’’

Sara Evans, an NAI spokeswoman, declined to comment Thursday on the judge’s comments. Kelli Raftery, a CBS spokeswoman, didn’t immediately respond to an email seeking comment.

CBS shares fell 0.7 percent in early trading Friday. They are down 10 percent this year.

Board Battle

A trial is set for Oct. 3 in Wilmington, Delaware, focusing on whether the CBS directors had the power to approve a dividend designed to dilute the Redstone family’s control. It also will weigh whether the Redstones’ countermove to change the company’s bylaws -- and stymie the effort -- was proper.

Part of Wednesday’s hearing focused on trust documents that lay out Redstone’s controlling interests in the National Amusements Inc. holding company, CBS and Viacom Inc. When Redstone dies, the trust doesn’t turn over control of NAI to Shari Redstone, the billionaire’s daughter, but to a board of trustees. The Wall Street Journal reported Thursday that the trust’s language puts substantial restrictions on trustees’ power to sell the companies once Redstone dies.

While the specifics of Redstone’s ailments haven’t been made public, the billionaire is said to communicate mostly through grunts and an iPad preprogrammed with his voice to say yes, no and a profanity.

Secret Recording

To buttress its argument about Redstone’s flagging abilities, CBS points to a secret recording of the billionaire made by a director who is a longtime friend of the media mogul. Bouchard reviewed that video behind closed doors.

“My concerns about the issues concerning Mr. Redstone’s competency predated seeing that video,’’ Bouchard said at Wednesday’s hearing. He refused media requests to make the video public, citing Redstone’s privacy.

It’s not the first time Bouchard has weighed concerns about Redstone’s mental acuity and his status as controlling shareholder of both CBS and Viacom, which owns cable networks MTV and Comedy Central and the Paramount Pictures movie studio.

Ex-Viacom CEO Philippe Dauman -- and other directors who sued Redstone for booting them from the board in 2016 -- unsuccessfully asked Bouchard to order the billionaire to undergo mental-capacity testing. They wanted a doctors’ assessment if Redstone was lucid when he removed five board members.

Videotaped Testimony

In another lawsuit filed by a former lover, a California judge threw out challenges to Redstone’s competency after he testified on videotape.

CBS investors suing directors over payments to Redstone also have challenged his competency and accused board members of improperly granting him millions in compensation after he became incapacitated in 2014. Bouchard allowed CBS shareholders to proceed with that suit, but threw out a similar action filed by Viacom investors last year.

Concerns about Redstone’s mental state “permeated the Viacom case,’’ Bouchard told lawyers at Wednesday’s hearing. “It has permeated these compensation cases that I’ve also been dealing with on the Viacom and the CBS side.’’

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

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Nick Turner

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