CBS and National Amusements are gearing up for battle, even if the chief executive of the former faces his own fight to stay at the top of his company.
Two filings made in Delaware Chancery Court, where the two companies are expected to appear in the fall as part of a much-anticipated courtroom showdown, nod to the intense back-and-forth that can be expected as National Amusements President Shari Redstone and CBS CEO Leslie Moonves vie to assert their control over the famous company that owns the CBS television network, Showtime pay-cable outlet and Simon & Schuster publishing house.
A National Amusements filing unsealed Tuesday alleged CBS executives have deleted evidence pertinent to the case by using TigerText, an iPhone application that can remove email messages. A CBS filing made today alleges that Redstone, who is also vice chairman of CBS, tried to oust board member Arnold Kopelson in the wake of his recording her father, Sumner Redstone, to capture evidence of the elder Redstone’s medical condition. The CBS filing was disclosed previously by The Wall Street Journal.
The allegations are eyebrow-raising, to be sure, but also to be expected as part of mammoth legal salvos from both sides in the wake of the CBS board deciding in May to try to issue a dividend that would dilute National Amusements stake in the company from around 80% to a little below 20%. If CBS is successful, National Amusements will be blocked from trying to push the company to merge with its other holding, Viacom Inc. If National Amusements prevails, its control over CBS will remain and senior management of the company is likely to depart.
Wall Street believes CBS’ effort has been severely hobbled by allegations raised in The New Yorker by six women who claim Moonves sexually harassed them over a period that stretched from the 1980s to the early 2000s. “I recognize that there were times decades ago when I may have made some women uncomfortable by making advances. Those were mistakes, and I regret them immensely,”Moonves told the magazine. ” But I always understood and respected—and abided by the principle—that ‘no’ means ‘no,’ and I have never misused my position to harm or hinder anyone’s career.” CBS’ board of directors has set an investigation of the claims, but took no action against Moonves, leaving him in place in his current role.
That gives NAI and Redstone new leverage in the ongoing dispute, said Tuna Amobi, a media-industry analyst with CFRA Research. He predicted Redstone would be “very vocal in terms of making sure that the board does the right thing.” But aside from calling last week for a “thorough, open and transparent” investigation of the claims raised by The New Yorker, Redstone has not released any other statements attributed to her.
Both sides eagerly worked to dismiss the other’s claims on Tuesday. “Tiger Text was implemented by CBS’s Information Security Group for cybersecurity reasons following the Sony hack, and was not developed or used for any nefarious or sinister communications as some have alleged,” CBS said in a statement.
Meanwhile, National Amusements tried to throw cold water on CBS’ assertion about Kopelson, who has enjoyed a long friendship with Moonves. “It is true that Mr. Kopelson secretly recorded a video of Mr. Redstone in his home, which is illegal under California law, and that NAI raised serious concerns about this,” the company said in a statement. ” NAI did not ask for Mr. Kopelson to be removed from the CBS board, but did make clear that it would not vote to reelect him at the annual meeting.” Richard Parsons, the executive who has served as chairman of Citigroup and CEO of the former Time Warner, is expected to stand to replace Kopelson. CBS this week opted to delay its annual shareholders meeting for the second time this year and has not set a new date.
But the filings suggest this battle will be as colorful as it is fierce. CBS states that Kopelson visited Sumner Redstone on January 28 and “video recorded an attempted conversation with Mr. Redstone during a visit to Mr. Redstone’s residence to ‘memorialize Mr. Redstone’s physical state.” The elder Redstone is said to have become more frail in his advanced years. Where he once took part in earnings calls for CBS and Viacom, delivering remarks praising the CEO of each company, he stopped speaking during them because he had trouble making himself understood clearly.
In its filing, NAI makes the case that “the senior management at CBS, as well as its legal department, used TigerText for certain of their communications – including communications directly relevant to this dispute – while still using their regular CBS email accounts for other communications.” The filing cites a February 2010 article in PC World that calls TigerText “The App for Spies and Cheaters.”
More back-and-forth is expected, with two sides currently slated to appear in Delaware court sometime in October. “I don’t think we’ve heard the last of this by any chance,” said Amobi, the analyst. “Nor do I think Leslie is out of the woods yet.”