Finance

Redstone Ousts Dauman from National Amusements Trust

Move could solidify Shari Redstone's ultimate control of company 5/21/2016 12:15 PM Eastern

After a dodging a bullet via a brief court battle that saw his former caregiver's attempt to have him declared incompetent tossed out of court, Viacom controlling shareholder Sumner Redstone apparently has reloaded his rifle, taking aim at his long-trusted confidant Philippe Dauman, seeking to have Viacom executive chairman and CEO removed from the trust that will control the company after the media mogul's death.

 

According to Fortune magazine and since confirmed by Viacom, Sumner  Redstone, through his lawyer Michael Tu, informed Dauman and Viacom board member George Abrams that they have been removed from the trust via fax. The trust was set up through National Amusements Inc. -- Redstone's theater chain business -- to hold his 80% voting control of Viacom and CBS. In the event of his death the trust would be managed by a seven-member committee that included Shari Redstone (also vice chairman of National Amusements), her son Tyler and her mother's divorce attorney. Since it is expected that Shari Redstone would replace Dauman and Abrams with trustees more sympathetic to her position, her power in the event of the death of her father rises exponentially.

 

In a statement, Shari Redstone said "I fully support my father’s decisions and respect his authority to make them.”

 

Because National Amusements is separate from Viacom, the most recent developments shouldn't affect Dauman's standing as executve chairman and CEO of the media company. But Shari Redstone  has increasingly become critical of his stewardship -- she was the lone board member who voted against Dauman being named executive chairman after her father gave up the title. 

 

Dauman has been a trusted advisor to Sumnr Redstone since the beginning -- he helped him win Paramount as a young Boston lawyer -- and has been regularly praised by the founder as one of the smartest men he knows. But Viacom has foundered under his watch, as ratings and its stock price have plunged.

 

Through a spokesman, Dauman called Shari Redstone's steps "invalid and illegal."

 

"They are a shameful effort by Shari Redstone to seize control by unlawfully using‎ her ailing father Sumner Redstone's name and signature,"Dauman's spokesman said. "As she knows and as court proceedings and other facts have demonstrated, Sumner Redstone now lacks the capacity to have taken these steps. Sumner Redstone would never have summarily dismissed Philippe Dauman and George Abrams, his trusted friends and advisors for decades."

 

Redstone's capacity has  question in recent months. Back in November, when Redstone's former girlfriend and caregiver Manuela Herzer was attempting to have Dauman removed as health care agent for the then-Viacom chairman, Dauman claimed in statements that Redstone was "engaged, attentive and opinionated." 

 

Herzer's suit, whcih called Redstone a "living ghost" unaware of his surroundings, was dismissed  by a California court after the media mogul's profanity-laden videotaped deposition on the first day of the trial, where he appeared lucid and vehemently denied any desire to have Herzer run his affairs. Although his speech was slurred -- the result of an earlier minor stroke -- Redstone said through an interpreter that he threw Herzer out of his house for lying to and allegedly stealing from him.

 

According to Fortune, Sumner Redstone has been angered at recent moves by Dauman to sell a minority interest in Paramount Pictures, the movie studio that Redstone battled to gain control of in the 1980s. He was prompted to oust Dauman and Abrams from the trust after expressing concern about company performance to them and receiving no response, according to reports.

 

Abrams, who has been with Redstone for more than half a century, also expressed sadness at the most recent developments.

 

“I have known and represented Sumner Redstone for over 50 years," Abrams said in a statement.  "I worked closely with him on the building of his theater chain, the acquisitions of Viacom, Paramount and CBS and countless business matters relating to all three of those entities as well as National Amusements.  I have also handled many personal matters for Sumner.  Above all, he is my friend.  The Sumner Redstone I knew would never have taken this action.  What is going on now is unsettling and sad.” 
 

In a statement, Viacom said the moves by Shari Redstone come as a surprise.

 

"The actions taken yesterday in Sumner Redstone’s name are completely inconsistent with his long expressed wishes and intent and extremely disruptive and damaging to Viacom and all its shareholders," Viacom said in its statement. "...The picture is quite clear, Mr. Redstone is being manipulated and used by his daughter in an attempt to accomplish her long-held goal, which Mr. Redstone has always opposed, of gaining control of National Amusements and Viacom."

 

Viacom claims there has been no communication from Sumner Redstone himself, and that during an in-depth strategy session with Viacom's board Tuesday evening -- where both Redstones were participating via phone -- no mention was made of any concerns regarding the trust.

 

"The only contact was a written communication on Tuesday from Mr. Tu, a lawyer previously unknown until this week to anyone associated with Sumner other than Shari Redstone," Viacom said in a statement. "It is clear that Shari Redstone has isolated her father and put his residence on lockdown, which provides clear evidence of her exercise of undue influence. Despite many attempts by members of Viacom's board, including the lead independent director, to meet with Sumner they have been denied access. Mr. Tu, when asked by the board’s independent counsel in response to Mr. Tu’s letter, could not even confirm he has met Mr. Redstone."

 

Earier this month Viacom's board of directors moved to eliminate Sumner Redstone's annual compensation, a move that lead independent director Fred Salerno said in a statement was made because of Redstone's lack of involvement in company matters.  

 

"We took this action based upon his recent 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," Salerno said in the statement. "In addition, despite numerous requests, I, along with the Chair of Viacom’s Governance and Nominating Committee, have been denied access to Sumner for a face-to-face meeting.
 
 
"The Independent directors are fully engaged and will carefully monitor actions at National Amusements, which is the controlling shareholder of Viacom," Salerno continued. "We are also continuing to work closely with the management team of Viacom and we fully endorse the strategy for the future of Viacom that the team presented at the Board’s day-long strategy meeting this week. We have great respect for Sumner and what he has accomplished. Our overarching duty is to represent the interests of all shareholders — in the same spirit that Sumner Redstone always led our Board to do.  We will continue to fulfill that role and uphold our fiduciary responsibility to ensure that Viacom’s interests are protected in concert with good governance practices.”
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