Investors Want Investigation of|$785 Million Viacom Write-Down

     (CN) – After underperforming television programming led to a $785 million write-down for Viacom, the board refused to investigate underlying misconduct, a class of shareholders claims in court.
     Robert Casey II filed the derivative suit Thursday on behalf of Viacom in Manhattan Supreme Court.
     Chairman of the board Sumner Redstone and 13 other board members are named as defendants.
     Viacom is the sixth-largest broadcasting and cable company in the world, and owns the brands MTV, VH1, BET, Nickelodeon, Comedy Central and SPIKE.
     Its 2014 public filings “repeatedly touted the company’s financial results and strong internal controls,” according to the shareholder complaint. Viacom reported a record profit in 2014, with earnings per share of $5.40.
     But in April 2015, Viacom revealed that it needed to write-down nearly $785 million in losses, primarily from underperforming television programming.
     Given this massive charge-down, Viacom announced it was pausing its $20 billion stock-repurchase plan, which had been in existence for years.
     After making this announcement, Viacom’s valuation fell $500 million, the complaint claims.
     “In the aftermath of defendants’ illicit activities, which ultimately caused the company to take a nearly $785 million charge, matters have only continued to deteriorate for the company,” the complaint states. “For example, in July 2015, EU regulators filed formal charges against Viacom’s subsidiary, Paramount Pictures, over alleged illegal licensing agreements.”
     Viacom’s common stock has declined 44 percent from a high of $88 per share in July 2014 to around $50 per share Friday.
     Lead plaintiff Casey says he issued a demand to the board to investigate the decisions that led to the $785 million charge, but was refused.
     “The refusal is most notable not for its contents, but for what it shockingly lacks – literally any substantive analysis of the claims set forth in the demand and/or the supplemental demand,” the complaint states.
     Casey accuses the board of making “deliberate and repeated efforts to hide everything concerning the process (and substance) of the audit committee’s investigation.”
     He says the company’s “complete secrecy” required him to file suit.
     Seeking damages for breach of fiduciary duty, unjust enrichment and gross mismanagement, the class is represented by Robert Harwood with Harwood Feffer.
     Viacom did not immediately respond to a request for comment.
     
     Editor’s Note: After this story was published, a representative for Viacom sent an email calling the suit “significantly flawed and completely without merit.”
     “We intend to vigorously defend against these baseless claims,” the representative added.

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