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Viacom Backs Grey as Probe Unfolds

April 04, 2006|Claudia Eller and Sallie Hofmeister | Times Staff Writers

Viacom Inc.'s top brass gave Brad Grey, chief executive of Paramount Motion Picture Group, a vote of confidence Monday despite the unwanted attention the studio is getting from his links to indicted private investigator Anthony Pellicano.

In their first interview on the subject, Viacom Chairman Sumner Redstone and CEO Tom Freston said Grey's ties to Pellicano were fully examined by the company before he joined the studio more than a year ago. They said they remained comfortable with their decision to tap the former talent manager to turn around the lagging studio.

"I have the utmost faith in the integrity of Brad Grey," Redstone said, acknowledging that in making such a blanket endorsement, "I'm going out on a limb here. We have investigated this to the fullest. But can anybody be certain of anything but life and death?"

He added that, for Grey, "it can't be pleasant to run the studio under these circumstances. But it has not materially interfered with his running the studio."

Freston, who personally selected Grey for the job, said that before he was hired, Grey was "totally upfront" about his involvement with Pellicano. Grey's attorney, Bertram Fields, had hired the investigator to work on two high-profile lawsuits brought against Grey by his former client Garry Shandling and "Scary Movie" executive producer Bo Zenga.

Grey informed his prospective bosses that he had testified twice before the grand jury as a witness in the Pellicano matter and had been questioned by the FBI.

In addition, Freston said, Viacom did its homework, largely through conversations between Viacom General Counsel Michael Fricklas and Grey's personal attorney, Ron Olson.

"We vet this in a responsible way," Freston said. "We were assured that Grey is a witness and not a target or even a subject in the investigation." Of Grey, Freston added, "I believe he's been honest with me."

Grey has since been the subject of frenzied Hollywood gossip and relentless media attention as the Pellicano scandal has unfolded.

In February, Pellicano and six associates were indicated on 110 counts of wiretapping and illegally accessing law enforcement records. More than 20 counts are tied to the two lawsuits involving Grey and Fields, who has acknowledged being a subject in the investigation.

On Monday, another prominent name, "Die Hard" director John McTiernan, was charged with lying to investigators about his knowledge of Pellicano's alleged wiretapping. He is the 14th person to be indicted in the Pellicano case.

Grey declined to be interviewed for this story.

His past ties to the investigator have put Paramount closer to the center of the escalating Pellicano imbroglio than anyone at Viacom would have liked. One studio insider, who declined to be named, said the scrutiny was "more intense than they bargained for."

Last month, a front-page story in the New York Times painted an unflattering portrait of the studio chief that was built in large part around Shandling's 1998 lawsuit.

Then, two weeks ago, Zenga filed an amended complaint in his spat with Grey. In that document, Zenga alleged that Pellicano obtained information on him through illegal wiretaps, giving Grey and his attorney an unfair edge in the case. Zenga's original suit was ultimately thrown out for lack of evidence.

The amended complaint alleges that Grey and Fields were "well acquainted with Pellicano's tactics."

Both Grey and Fields have denied knowing of any illegal activities by Pellicano.

Wall Street analysts said that though investors were not watching the scandal closely, there was concern that it was diverting Grey's attention from his primary mission: reviving Paramount.

In addition to trying to bolster the studio's movie lineup, he is building its specialty film and international distribution operations and is in the process of integrating the company's newly acquired DreamWorks SKG unit.

"Brad Grey has so much on his plate that this is a distraction he doesn't need right now," said veteran media analyst Harold Vogel. "It cannot make the management of Viacom as comfortable as they'd like to be."

Corporate governance experts say the Viacom board needs to continue monitoring the situation with Grey.

"The board needs to satisfy themselves that he acted appropriately," said Charles Elson, director of the University of Delaware's Center for Corporate Governance. "They also have to ask, 'Will it affect his ability to do his job?' "

At the same time, Elson said, it would be unfair to prejudge Grey.

"You can't have guilt by association," he said.

But that doesn't stop industry insiders from making Grey one of the hottest topics of conversation in Hollywood.

When Grey recently hired former Universal Pictures Chairwoman Stacey Snider to run Paramount's DreamWorks unit, industry insiders speculated that she would inadvertently provide Viacom a contingency plan if needed.

Freston said Snider was hired for one reason only: to run DreamWorks. Meanwhile, he said, Grey has not missed a beat.

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