CBS Radio jolted shock jock Howard Stern and Sirius Satellite Radio Inc. on Tuesday with a $218-million lawsuit that alleged Stern misused the company’s airtime in a scheme to boost the payment he received when he moved to Sirius in January.
CBS contends that while it employed Stern, the host spent more than a year hyping his upcoming switch to Sirius and, as a result, improperly enriched himself, “pocketing over $200 million for his personal benefit” by driving up Sirius’ subscriber numbers.
The subscription increase allowed Stern to trigger an early grant of more than 34 million shares of Sirius stock, valued at about $220 million, the suit alleged. That compensation was disclosed by Sirius this year after Stern had signed off CBS’ airwaves.
Stern had a financial incentive “to do all that he could to help Sirius reach the subscriber targets by the end of 2005 so that he could receive his Sirius stock payment as soon as possible while Sirius’ stock was extremely valuable,” according to the lawsuit filed in New York Supreme Court.
Also named in the breach-of-contract and fraud suit were Stern’s production company and his agent, Don Buchwald. In addition to the $218 million in restitution, CBS is seeking unspecified punitive damages.
Peter Parcher, Stern’s attorney, said CBS could have punished Stern in the more than 14 months he was on the air after he shook up the radio industry by giving notice that he was jumping to Sirius.
“They had the ability to cut portions of his broadcast if they wanted to,” Parcher said. “Anybody who wasn’t living under a rock knew that Howard was going to Sirius, and that if Sirius did well, Howard would do well also.”
Stern began broadcasting with Sirius in January under a five-year contract worth more than $600 million. The fledgling satellite broadcaster hopes that millions of Stern’s fans will subscribe to its service, enticed by ribald material that conventional broadcasters were reluctant to air because of federal decency standards.
“There were no secret negotiations; I spoke about it on the radio,” Stern said at a hastily called news conference Tuesday in New York after rumors of the suit appeared in the New York Post. CBS Corp. Chief Executive Leslie Moonves “has had it in for me for a long time.”
Stern also defended himself on air, calling Moonves “a snake in the grass” with a “personal vendetta” against him.
CBS declined to comment.
Stern’s frequent mentions of Sirius on his CBS show in the days leading up to his departure did earn him a one-day suspension in November. Stern and his on-air crew frequently referred to Sirius in code as “eh eh.”
But in the final week of Stern’s CBS show, he and Moonves seemed to have made up. Moonves appeared on his show Dec. 14, publicly bidding him farewell.
Moonves even said he had subscribed to Sirius so he could continue to listen to Stern.
Stern told Moonves that his departure had nothing to do with CBS but was motivated by his desire to break free from the Federal Communications Commission indecency rules.
Stern battled for years with regulators regarding on-air indecency. In 2004, Viacom Inc. agreed to pay $3.5 million to settle complaints that it had broadcast sexually explicit material, some of it on Stern’s show.
Sirius executives have said that Stern’s move to the network has attracted more than 1 million new subscribers, boosting their listeners to 3.3 million. But costs associated with Stern and other content deals have proved high, and the company’s losses grew to $311.4 million in the quarter ended Dec. 31.
Stern’s move has also been costly to CBS. Executives say the company will lose $100 million in annual advertising sales from his departure. In the lawsuit, CBS said Stern “caused it to incur substantial expenses and obligations it would not have incurred but for the deception.”
The suit also alleges that Stern has refused to hand over recordings of old shows owned by CBS Radio, and that he “threatened to burn or bulk erase the [audio recordings] if CBS Radio did not let him take possession of them.”
The suit pits CBS Chairman Sumner Redstone against Mel Karmazin, his former No. 2 who is now Sirius’ chief executive.
Karmazin was an early champion of Stern at Infinity Broadcasting, which the executive sold to CBS. Redstone’s Viacom Inc. then bought CBS in 2000 for $50 billion. Redstone eventually forced Karmazin out in a power struggle. He also separated Viacom from CBS at the end of December.
Karmazin has said that one of the reasons he joined Sirius is because the network had lured Stern into its celestial fold.
When Karmazin left Viacom, Stern bemoaned the loss, saying, “If it wasn’t for Mel, I’d probably be a telemarketer right now.”