Viacom Board Battle Lights Up Both Coasts

WILMINGTON, Del. (CN) — The struggle for Viacom became even more tangled Thursday when the lead independent director of the board sued Sumner Redstone and his daughter Shari, claiming she's trying to seize control of the company through undue influence on her 93-year-old father by removing the independent board.

Frederic V.Salerno sued the Redstones and National Amusements and NAI Entertainment Holdings in Delaware Chancery Court. He also sued Viacom itself as a nominal defendant.

Also Thursday in the same court, National Amusements (NAI) filed a complaint, In re Viacom, seeking to affirm the removal of Salerno and four other board members: George Abrams, Blythe McGarvie, William Schwartz and Philippe Dauman.

This article will primarily address Salerno's complaint. He asks the court to reinstate, or keep in place, the five directors. NAI asks the court to declare the recently changed bylaws valid, and the validity of the five directors' removal.

Salerno says he's been a director of Viacom and its predecessors for more than 20 years, and that the board appointed him its lead independent director in March.

He says in the lawsuit that a "brazen and invalid attempt at removal of certain Viacom directors has been undertaken by Shari E. Redstone, the daughter of Sumner M. Redstone, the 93-year-old controlling stockholder of Viacom's controlling parent company."

Salerno says that removing the targeted directors would violate "Mr. Redstone's unwavering plan for decades" which was, and is, to be "based on independent control and professional management of Viacom going forward."

Sumner Redstone controls Viacom through National Amusements Inc., which owns 80 percent of the voting shares of the company.

Salerno portrays Shari Redstone as a "puppet master" who controls her father because of his "debilitating health and isolation."

He claims that written consents to remove independent board members are not the doing of Sumner Redstone but of his daughter, who is "exercising undue influence over her defenseless father and/or manipulating him to purportedly exercise authority when he was not mentally competent to have done so."

"Now, when Mr. Redstone's physical and mental conditions have dramatically declined and he is unable to fend for himself, Shari has moved into his home, taken over his life, isolated him from contact with others, and purports to speak for him. In other words, unsatisfied with assets now worth more than $1 billion derived from gifts her father made to her over the years ... Shari is attempting to use her father's control to dismantle his own estate plan to serve her personal interests," Salerno says in the complaint.

He says that Sumner Redstone "never intended to vest his family members, and in particular his daughter Shari, with control over the NAI board or the Viacom Board, or the power to replace independent directors. Indeed, he wanted just the opposite."

Before their recent reconciliation, the relationship between the elder Redstone and his daughter had been "strained and contentious," Salerno says.

"After evaluating many factors, from their respective abilities to manage the companies to the potential for interfamily conflict, Mr. Redstone remained resolute about a plan he had long in the works — a plan that would benefit his children, grandchildren and all public stockholders — premised on placing trust in professionals, rather than family members, to manage NAI and its signature businesses," according to the complaint.

Dauman, Viacom's CEO, was long thought to be the successor to Sumner Redstone, as he served as his adviser and counselor for several decades.

Redstone called Dauman the "wisest man I've ever known," Salerno says in his complaint.

He claims that Shari Redstone seized upon her father's special interest in Paramount Pictures, a Viacom property which he calls his "baby," to wrest control of the board.

"Indeed, Shari has seized on her father's intransigent and uninformed view about a Paramount transaction in order to force through changes on the Viacom board," Salerno says in the complaint.

He adds: "Shari has used Mr. Redstone's stated opposition to any transaction involving Paramount as an opportunity to advance her goal of acquiring control of Viacom. As part of these efforts, on June 6, 2016, NAI delivered written consents to Viacom purporting to amend the Company's bylaws to, among other things, require approval of all the directors then in office to approve any transaction involving Paramount."

Finally, on Thursday, June 16, "Shari caused a written consent to be delivered to Viacom, supposedly on NAI's behalf, purporting to remove George Abrams, Philippe Dauman, Blythe McGarvie, Frederic Salerno and William Schwartz as directors on the Viacom Board.

"Although these removal attempts at the Trust, NAI and Viacom were purportedly taken directly or indirectly by Mr. Redstone, it is clear they were orchestrated by Shari. In other words, the purported removal of Messrs. Abrams and Dauman as trustees of the Trust and directors on the boards of the companies of the NAI Group, and the subsequent purported removal of the Viacom directors from the Viacom Board, in no way reflect voluntary or meaningful decisionmaking by Mr. Redstone. Mr. Redstone would never sanction these actions if he had capacity and was acting free of Shari's undue influence."

Sumner Redstone's competency has made headlines all spring as several parties have struggled for control of the $40 billion corporation.

Sumner's ex-girlfriend, Manuela Herzer, filed a probate complaint in Los Angeles County Superior Court challenging his competency, and two dismissed executives, Philippe Dauman and George Abrams, went to court in Massachusetts, claiming Shari Redstone was behind their dismissals.

Salerno seeks a court order maintaining the old status quo on the board, and declaring the written consent removing the five directors invalid.

He is represented by Edward Micheletti with Skadden Arps.

NAI asks the court to approve the change in the bylaws and the removal of the targeted directors. It is represented by Donald Wolfe Jr. with Potter Anderson & Corroon.

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