BUSINESS

Redstone's health clouds future of CBS, Viacom

Redstone's health is being watched closely because he controls both CBS and Viacom

As CBS Corp. investors gather at New York's Museum of Modern Art for the company's annual meeting Thursday, its largest shareholder is expected to remain cloistered in his mansion in a gated enclave north of Beverly Hills.

Sumner Redstone, who turns 92 next week, has largely disappeared from public view. He hasn't participated in conference calls with Wall Street analysts since November, when his garbled speech made his words nearly unintelligible.

Redstone's health is being watched closely because he is the executive chairman and controlling shareholder of both CBS and Viacom Inc. When he dies or is no longer able to oversee his affairs, trustees overseeing a trust will determine what happens to his controlling interest in the two companies. That has led to speculation that both CBS and Viacom could be sold.

Viacom is led by Philippe Dauman and CBS is managed by Leslie Moonves, two high-powered executives who both have long-term employment contracts. Nonetheless, there is deep uncertainty among investors over how the group of trustees eventually will determine the direction for the two separate companies.

"What happens to CBS? What happens to Viacom when things change?" asked Mario Gabelli, whose investment firm controls the second-largest bloc of votes in Viacom and CBS. "I don't know. It's hard to tell what happens when these family situations are involved."

Redstone has long taken pride in how his companies perform, making his absence from company events all the more significant, Gabelli said.

"When he's not on calls, you know something is wrong," he said. "My prayers are with him, but it is what it is."

Representatives of CBS and Viacom declined to discuss Redstone's health or personal affairs, including reports of friction between Redstone's daughter, Shari Redstone, and the mogul's female companions, Sydney D. Holland and Manuela Herzer.

"Sumner's situation has not affected the management of Viacom," Viacom spokesman Carl Folta said in a statement. "He communicates with senior management directly every week andcontinues to monitor the company's board meetings and its quarterly earnings calls via a phone line from his home in Beverly Park."

Redstone, who was badly burned in a hotel fire in Boston 36 years ago, has been in declining physical health for several years. However, he remains mentally sharp, according to his attorney Leah Bishop.

"He is alert and cognizant," Bishop said. "He has a bad speech impediment that has gotten worse in the little bit over a year that I have represented him. And he gets angry and frustrated when he can't be understood."

Bishop, who was hired in early 2014 to handle Redstone's estate planning, said she frequently meets with Redstone at his home and that he is able to sign documents.

"It's very clear to me that he understands everything that we are talking about, and he asks me questions," she said. In a later statement, she added, "Careful planning has been done so that estate taxes at Mr. Redstone's death will not require a forced sale of assets."

Redstone's net worth is estimated at $6.2 billion. When he dies, the Sumner M. Redstone National Amusements Trust will determine what happens to his controlling interest in the companies. The companies each have a two-tier stock structure, with most shareholders owning non-voting shares. Redstone holds about 79% of the voting shares of the two companies.

Seven people eventually will oversee the trust. The group includes daughter Shari Redstone, her son Tyler J. Korff, Viacom CEO Dauman, Viacom board member George S. Abrams, CBS board member and longtime Redstone attorney David R. Andelman, and two Boston attorneys.

Despite his ailments, Redstone continues to collect a handsome salary in his role as executive chairman of the two companies. He has received more than $169 million in salary, bonuses and benefits during a three-year period between 2012 and 2014, according to company filings.

He also has been busy selling stock. A review of Securities and Exchange Commission filings shows that Redstone has cashed CBS and Viacom stock options valued at about $350 million during the last 12 months. The divestitures — which generated nearly $200 million in net proceeds to Redstone — were part of Redstone's estate planning, according to the documents.

Redstone's personal life has long been a complicated and, at times, messy affair.

In its June issue, Vanity Fair published a lengthy article that delved into "Shakespearean power plays at work in Redstone's kingdom." The article featured photos and interviews with Holland and Herzer, two women who have become central figures in his life.

Herzer, who was described as having an on-again, off-again relationship with Redstone for two decades, was quoted as saying that Redstone had "gifted" her with a penthouse apartment in the luxury Carlyle Hotel, which overlooks Central Park in New York. Redstone's attorney said Redstone owns the apartment.

Holland, in an email to The Times, said that she met Redstone in 2011. They were introduced by a mutual friend.

Since moving in with Redstone, she launched a TV production company called Rich Hippie Productions and the Sydney D. Holland Foundation. An online biography describes Holland as a former fashion consultant who is now "a renowned philanthropist." She also adopted a daughter, Alexandra Red, named in part after Redstone.

Years before she met Redstone, Holland and a friend formed their own matchmaking service. To announce their business in 2004, the two women took out a personal advertisement in Los Angeles magazine, which featured a photo of them wearing black camisoles.

They described their venture, "The Inner Circle. VIP Social Club," like this: "A first-class dating service for exclusive gentlemen and exquisite ladies who seek to meet the love of their life!" On Wednesday, Holland said the service was formed for a reality TV show. The project never materialized.

Several people who are close to the situation, but who were not authorized to speak publicly, allege that Holland has used her influence to isolate Redstone from people who once played significant roles in his life — including his daughter, his grandchildren, friends, his doctor and even his longtime personal assistant Carlos Martinez.

Holland disputed the allegation.

"This is totally untrue; Sumner continues to see his friends, business associates and his granddaughter Karen Redstone regularly," Holland said.

But there have been dust-ups. In 2013, Holland filed a lawsuit in Los Angeles Superior Court against another woman who had a relationship with Redstone, Heather Naylor.

Naylor, a singer now in her early 30s, starred in a short-lived show on Viacom's MTV network called "The Electric Barbarellas" in 2011. The show returned in 2013, renamed "The Alectrix," and chronicled Naylor and her girl-band's quest for stardom.

In her lawsuit, Holland accused Naylor of stealing her laptop and other property. Naylor denied the charge and filed a countersuit alleging that Holland interfered with her contract with MTV by disparaging her to Redstone and MTV executives, who canceled her show.

Naylor alleged that Holland was fortifying her position in the Redstone empire by getting rid of those whom she viewed as threats.

"For her own economic advantage Holland cut off all modes of communication between Redstone and Naylor," Naylor's lawsuit said. "Virtually all of Redstone's longtime household staff has now been terminated because of the actions and influence of Holland."

Last month, Holland asked Superior Court Judge Ernest Hiroshige to dismiss the case.

Tumultuous relationships have long defined the Redstone family. Redstone had a falling out with his son, Brent Redstone, now 65. Shari Redstone, 61, who serves as vice chairman of CBS and Viacom, once had a close relationship with her father, but in recent years it has become more distant.

According to people close to the family, her adult son Brandon Korff also has felt increasingly uncomfortable at Redstone's mansion. He used to be a frequent companion to his grandfather. The pair would watch sports on TV and Korff would usher his grandfather around to local restaurants and public events, such as a ceremony to name a building after Redstone at the USC School of Cinematic Arts.

People close to the situation also said a visit by Shari Redstone and 29-year-old son Tyler Korff to Redstone's mansion last fall ended badly after Shari asked a nurse to leave the room so that the family could be alone with Redstone. The nurse refused, according to one of the people, saying that he had been told not to leave Redstone unattended with his family.

"My father is one of the most significant people in my life, and my children and I will always love him," Shari Redstone said Wednesday night in a statement through a spokesperson.

Times staff writer Ryan Faughnder contributed to this report.

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