Shari vs. Philippe: War Over Future of Sumner Redstone’s Empire Takes New Turns

The fierce fight between Viacom CEO Philippe Dauman and board member and possible heir-apparent Shari Redstone spiraled to new heights on Saturday, as the conglomerate issued a statement accusing Redstone of isolating her father in order to take control of the company.

The latest salvo came in the form of a statement from Viacom, which said that Sumner Redstone, the 92-year-old media baron who controls Viacom and CBS Corp., had been shut away and subjected to undue influence. “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,” the statement read, in part.

Shari Redstone responded Saturday afternoon with a one-sentence statement from her spokeswoman: “I fully support my father’s decisions and respect his authority to make them.”

The latest fighting in the battle for control of Redstone’s empire erupted Friday afternoon when word surfaced that Viacom CEO Philippe Dauman and longtime Viacom board member George Abrams had been removed by Sumner Redstone as trustees of the Redstone Family Trust that will oversee his holdings in Viacom and CBS Corp. after the mogul’s death. That move was a shock given that Dauman and Abrams have been friends and confidants of the elder Redstone for decades.

Viacom countered Shari Redstone’s remark with two new statements: one from Abrams, who emphasized his 50-year relationship with the elder Redstone and called his removal “unsettling and sad”; and one from Viacom board member, Frederic Salerno, who is Viacom’s lead independent director.

Viacom’s lengthy statement accusing Shari of manipulating her father came just hours after an attorney, Michael Tu, representing the 92-year-old Redstone that said he had ejected Dauman from the trust in part because of mounting concerns about the performance of Viacom.

“Sumner Redstone took decisive and lawful action today which he firmly believes is in the best interests of Viacom Inc. and its stockholders when he removed Philippe Dauman and George Abrams as trustees of his Trust and directors of National Amusements, Inc.” The missive from Tu added: “Mr. Redstone acted after he expressed his concerns regarding Viacom’s performance to Messrs. Abrams and Dauman, both Viacom directors, and received no response from them.”

The pointed nature of the statement from Tu has raised speculation that Sumner Redstone could move to oust Dauman from his CEO perch. That process would take more time as the decision would have to be approved by the Viacom board of directors.

The majority of that 11-member panel has repeatedly demonstrated its loyalty to Dauman, most recently in February when it voted 10-1 to have Dauman replaced Sumner Redstone as chairman, amid pressure from investors because of reports about Redstone’s mental and physical condition. The sole dissenting vote was cast by Shari Redstone, who is vice chairman of the boards of Viacom and CBS.

Individuals close to Dauman questioned whether the harsh statements coming from Redstone reflected his true feelings. They noted that during multiple appearances when Redstone was still speaking publicly, he defended the Viacom CEO.

“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 Saturday statement, which was attributed to a spokesman, not Dauman.

“There has been no communication from Sumner Redstone,” the statement continued. “In fact, during an in-depth strategy session of Viacom’s Board Tuesday evening and all day Wednesday, not a sound was heard from Sumner, who was connected by phone. Shari Redstone, also connected by phone, did not raise a single concern during the Board session on any topic.”

The statement also suggested Shari Redstone was behind the statement from Tu, calling him “a lawyer previously unknown until this week to anyone associated with Sumner other than Shari Redstone,” and adding: “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.”

The letter said that members of the Viacom board and “the lead independent director” have attempted to meet with Redstone and been “denied access.” It concluded with the accusation that Shari Redstone was guiding the actions, to further her goal of taking over her father’s company.

Abrams’ statement emphasized the depth of his business and personal ties to Sumner Redstone.

“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,” Abrams said. “The Sumner Redstone I knew would never have taken this action.  What is going on now is unsettling and sad.”

Salerno, who is also a board member of CBS Corp., said he and other board members have been denied face-to-face meetings with Sumner Redstone. Salerno said that the Viacom board’s vote on Wednesday to stop paying Redstone his annual salary came out of concerns about his “complete lack of communication” in recent months.

“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 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.”

Saturday’s sharp accusations against Shari Redstone come after a whirlwind 24 hours in the Redstone saga that has been as melodramatic and tawdry as any TV soap opera during the past nine months. 

First, on Friday Fortune broke the news that an attorney Tu had faxed Dauman and director George Abrams to tell them they were ousted from the board of National Amusements, the Redstone entity that controls Viacom and CBS. Then a spokesman for Dauman said he could not be ousted from the National Amusements Trust, because the 92-year-old Redstone “lacks the [mental] capacity to have taken these steps.”

Redstone’s attorney then sharply rebutted that claim with a statement of his own. “The public statement made on Mr. Dauman’s behalf attacking Mr. Redstone’s capacity is disappointing and incorrect, as reflected by Mr. Dauman’s own testimony given under oath less than six months ago that Mr. Redstone is as ‘engaged, attentive and as opinionated as ever,'” it said. “That is exactly the Sumner Redstone who made these decisions today.”

Indeed, the rapidly escalating corporate drama marked a sharp reversal of the Redstone-Dauman relationship. While Redstone has had famously contentious dealings with daughter Shari and other members of his family, he has for decades treated Dauman almost like a second son. When the Viacom CEO came under frequent attack for the conglomerate’s flagging performance and stagnant stock price, Redstone rose to his defense, time and again.

Dauman, in turn, backed his boss and mentor. He gave a deposition in a recently completed court hearing into Redstone’s mental capacity, saying that his Redstone had difficulty communicating only because of a speech impediment. Dauman’s statements, under oath, made it sound as if the frail Redstone had barely lost a step in terms of mental acuity. Testimony from an expert witness suggested, however, that the 92-year-old media titan had trouble identifying colors and answering other basic questions. And when Redstone gave his own deposition, he was unable to provide a response when asked how his family had come to change its name to Redstone.

That testimony came in the trial pressed by Redstone’s long-time companion and ex-girlfriend, Manuela Herzer. She asked a judge to declare Redstone mentally incapacitated and to reinstate her as his health care agent — empowered to make decisions should Redstone ever be declared mentally unfit. Judge David J. Cowan rejected Herzer’s gambit, saying that Redstone had made clear in his 18-minute deposition that he wanted Herzer out of his life. But Cowan made no finding about Redstone’s mental capacity.

Though the magnate won that temporary victory, it did nothing to stem speculation about his end-of-life challenges and about whether others might be guiding decisions coming out of his Beverly Park mansion. Dauman certainly tried to paint that picture in the Friday statement. He called the action removing him and Abrams from the National Amusements trust “a shameful effort by Shari Redstone to seize control by unlawfully using her ailing father Sumner Redstone’s name and signature.”

Here is Frederic Salerno’s full statement:

“In March, the Board of Viacom elected me to serve as Lead Independent Director to ensure a continuation of good governance at Viacom, particularly as a result of Sumner Redstone’s diminished role.

“The majority of the full Board and every Board Committee is comprised of independent directors and we are completely focused on ensuring that the interests of all shareholders are considered and fully protected. The Board has taken a number of steps including, most recently, eliminating Mr. Redstone’s compensation.  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.  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. 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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