Viacom’s Philippe Dauman sues to get back on Sumner Redstone trust

Viacom Inc. Chief Executive Philippe Dauman and fellow Viacom board director George Abrams filed a lawsuit Monday in Massachusetts probate court that seeks to invalidate changes that ousted them as directors in Sumner Redstone’s trust.

The move appears to be unprecedented, and is a declaration of war over Redstone’s controlling interests in Viacom and CBS Corp.

Dauman and Abrams are suing Redstone trust members, including Sumner Redstone himself and Shari Redstone, alleging that she is manipulating her father in his weakened condition to alter the trust that will one day decide the fates of Redstone’s two media companies.

“Shari’s actions amount to an unlawful corporate takeover, and if effectuated, could have far-reaching consequences for thousands of shareholders and employees of Viacom,” Dauman said in a statement.

A spokeswoman for Shari Redstone called the allegations “absurd.”

“It is absurd for anyone to accuse Shari of manipulating her father or controlling what goes on in his household.... He has his own team of independent advisors to counsel him,” said Nancy Sterling. “Sumner makes his own decisions regarding whom he wants to see both in his home and elsewhere.”

The 24-page lawsuit -- filed by Dauman and Abrams in the Probate and Family Court of Norfolk, Mass. -- also lists as defendants Shari Redstone’s son, Tyler Korff; CBS board member David Andelman; and two Boston divorce lawyers who represented Sumner Redstone and his first wife, Phyllis Redstone, more than 15 years ago.

All serve on the Sumner Murray Redstone National Amusements Inc. Trust. National Amusements is the Redstone family’s Massachusetts-based investment vehicle which holds 80% of the voting shares of Viacom and CBS. The two media companies have two classes of shares.

Redstone selected various members of the trust, including Dauman and Abrams, more than 20 years ago to oversee his shares in the media company when he was no longer capable, according to the lawsuit.

“Shari Redstone is attempting to illegally hijack her father’s well-established estate plan by removing professional managers and reportedly installing her daughter, an employee and a friend who are firmly under her control,” Dauman said.

Redstone and his daughter have a long history of conflict, particularly when it came to issues of Viacom corporate governance, the suit said.

It also said that Shari Redstone has installed her daughter, Kimberlee Korff Ostheimer, as one of the new directors of National Amusements.

Sumner Redstone is in “the grip of a neurological disorder” and has become dependent on his once-estranged daughter for his care, according to the suit.

Redstone, who turns 93 later this week, “is afflicted with a ‘subcortical neurological disorder’ that can be characterized by dementia, impaired cognition, a slowness of mental processing...and depression,” the suit said.

Late Friday, Sumner Redstone abruptly dismissed Dauman and Abrams as designated trustees of the Sumner Murray Redstone National Amusements Inc. Trust.

Shareholders of Viacom, which has seen its stock plummet in the last two years, are suddenly caught up in the corporate drama.

Shares of the media company jumped more than 3%, to more than $40 a share, in Monday morning trading. Viacom shares are down more than 40% in the last year.

One prominent Wall Street analyst on Monday called the situation “toxic.”

“The subsequent legal volley this morning involving the filing of a lawsuit to block this change only appears to amplify a toxic situation, where investors have little sense of who will control the company in the months (if not years) ahead,” Brian Wieser, media analyst with Pivotal Research, wrote in a research report.

A Los Angeles lawyer, brought on in recent weeks to represent Redstone, said the mogul -- who has a severe speech impediment -- said Redstone took the action late Friday because he has lost confidence in Dauman and Abrams, his friend for more than 50 years.

Redstone is said to be upset because Dauman is seeking investors to buy a piece of Paramount Pictures, the legendary Hollywood movie studio that has long been one of Redstone’s treasured properties.

“We all continue to have great respect and affection for Mr. Redstone, but he is clearly being manipulated by his daughter, Shari,” Dauman said.

“After years of estrangement, she has inserted herself into his home, taken over his life, and isolated him from anyone not under her control, including longtime business colleagues,” Dauman said.

“She has recently and repeatedly arranged to deny requests for Viacom board members to meet with her father.”

In a deposition earlier this month in a separate case, the ailing mogul failed to respond when asked to provide his given name: Sumner Murray Rothstein. Redstone, however, had no problem using obscenities to describe his former girlfriend, Manuela Herzer, who brought the case that challenged Redstone’s mental capacity late last year.

That case brought to the surface years of tension and infighting among Sumner Redstone’s inner circle. After watching a videotape of Redstone’s May 5 deposition, the Los Angeles County judge overseeing the case stopped short of deciding whether Redstone was mentally competent.

Instead, Superior Court Judge David J. Cowan concluded that Redstone made it clear that he wanted his daughter in charge of his healthcare.

Now the battle is over whether Shari Redstone will succeed in consolidating control of the trust that will oversee her father’s voting shares in the two media companies.

“She is attempting to ... dismantle his estate plan to serve her own interests and assume control of his businesses which he long refused her,” the Dauman and Abrams lawsuit says.

The removal of Abrams and Dauman “will illegitimately tip the balance of power to her,” the lawsuit reads.