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Suit against Redstone is ruled `too late'

A nephew's claim that he was defrauded by the Viacom CEO is tossed.

July 28, 2007|Michael A. Hiltzik | Times Staff Writer

A Massachusetts state judge Friday dismissed a lawsuit brought against Viacom Inc. Chairman and Chief Executive Sumner Redstone by his nephew, ruling that the plaintiff's allegation that he was defrauded by his uncle "arrived more than two decades too late."

Michael Redstone, 50, claimed that he and his late sister, Ruth Ann, were cheated out of their shares of the Redstone family business in two stock sales his uncle engineered in 1972 and 1984. Sumner's own children, Brent and Shari, also were defrauded in the sales, Michael alleged.

He contended that Sumner arranged to repurchase the shares at fraudulently low prices so he could obtain control of the business, National Amusements Inc. The elder Redstone, 84, subsequently built National into a worldwide media conglomerate that today owns controlling interests in Viacom and CBS Inc.

Michael also named his father, Edward Redstone, who participated in the transactions, as a defendant.

Neither Michael nor his attorneys were available Friday to comment on whether they may pursue an appeal. The dismissal by Superior Court Justice Allan van Gestel came on a motion for summary judgment by the defendants.

The judge's action may have repercussions for another Redstone family drama. That's the dispute between Sumner and his daughter, Shari, 53, president of National Amusements and vice chairwoman at Viacom and CBS, over her position in the companies after the billionaire mogul's death.

Although Shari was not likely to join Michael's lawsuit, she might well have exploited testimony and documents produced in its pretrail phase to gain leverage in her increasingly vitriolic battle with her father. Material filed in court before the state judge suspended discovery in May detailed internecine strife and financial maneuvers among the Redstone clan dating back more than 30 years.

At the heart of Michael Redstone's case were the two repurchases of National Amusements shares from trusts established by Mickey Redstone, Sumner's father and the company's founder, for his four grandchildren. The transactions amounted to the acquisition of more than 65% of the company's shares for a total of $26.4 million.

Among Michael's allegations were that the larger transaction in 1984 was based on a company appraisal, performed by an accountant in Sumner's employ, that failed to include hundreds of millions of dollars in securities and real estate owned by the company at the time.

Michael contended that he was unaware of the scope of the fraud in 1972 and 1984 until 2004, when documents relating to the stock sales were produced in connection with a separate lawsuit filed that year by his father. A lawsuit filed in 2006 by Brent, Sumner's son, disclosed more details, he argued.

Because the three-year statute of limitations on fraud claims in Massachusetts runs from the moment a claimant first learns that a fraud was committed, Michael argued that his lawsuit was timely.

But Van Gestel ruled that Michael actually had been aware of the 1984 repurchase at the time it happened, when he was 27 and about to start his studies for a master's degree at a Boston-area business school. He also noted that the trustee of the children's trust at the time, James R. DeGiacomo, was aware of both transactions when they occurred and failed to bring action to block them.

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