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What a settlement in Sumner Redstone healthcare dispute would look like

What a settlement in Sumner Redstone healthcare dispute would look like
Lawyers are close to a deal in the bitter legal dispute over the healthcare of Sumner Redstone, who controls CBS and Viacom. Redstone seen here in 2013. (Lawrence K. Ho / Los Angeles Times)

Lawyers have crafted the outlines of a potential settlement in the high-stakes legal drama over whether media mogul Sumner Redstone is mentally competent to handle his affairs.

The various sides were finalizing an agreement late Thursday between Redstone and his former companion, according to two people familiar with the discussions who were not authorized to publicly discuss the situation.

The proposed settlement, if approved by a judge, would close the chapter on a tawdry lawsuit that has been a distraction for media company Viacom Inc. The agreement is expected to be brought before a Los Angeles County judge next week.

Redstone, 92, controls media companies CBS Corp. and Viacom Inc., which owns Paramount Pictures, and the MTV, Comedy Central and Nickelodeon cable channels.

The bitter dispute over his healthcare has shined a harsh light on the jockeying for money and power among the people who have been in the billionaire's inner circle in recent years.

The case also revealed the diminishing involvement of Redstone in the management of his two companies as his health began to deteriorate.

Redstone's former companion Manuela Herzer brought the lawsuit in late November after Redstone expelled her from his life and his Beverly Park home.

Under the terms of the tentative proposal, Herzer, 51, would abandon her claim that she should return to a position of power overseeing Redstone's healthcare, according to the knowledgeable people. She would agree to cut ties to the mogul and would receive a monetary settlement of about $25 million.

Attorneys representing the different parties declined to comment.

A trial may have provided investors with greater insight into Redstone's ailing health and how high-level decisions were reached at Viacom and CBS.

"This proposed settlement kind of dashes hopes that more light would be shed on how Sumner is doing and whether or not he is mentally competent," said Eric Jackson, managing director of SpringOwl Asset management, which is agitating for management changes at Viacom. "Once again, it was the shareholders who were not represented."

The agreement is said to contain another provision to ensure that ongoing medical care for the ailing mogul be provided by a professional home healthcare company.

Los Angeles County Superior Court Judge David J. Cowan last month expressed deep concern that the people who are closest to Redstone — his daughter, Shari Redstone; Viacom Chief Executive Philippe Dauman; and Viacom Chief Operating Officer Thomas Dooley — all live on the East Coast and would not be readily available in case of an emergency.

Redstone's proposed healthcare plan was designed to provide assurances that the billionaire would continue to receive high-quality care at his home, and that an outside firm would be on site to oversee administrative details, including the scheduling of nurses who care for him.

For months, Redstone has had around-the-clock attention from a large staff of nurses, but rivalries surfaced, and the nurses squabbled among themselves. Under the proposed deal terms, Redstone would continue to receive treatment from his current set of doctors and the home healthcare firm would provide management oversight of the nursing staff.

Settlement talks accelerated in the last week in advance of two high-profile depositions that had been scheduled in New York for Dauman and Shari Redstone, who also is vice chair of CBS and Viacom. Those depositions were called off earlier this week to allow the settlement talks to proceed.

All sides in the dispute were motivated to make a deal to avoid a high-profile trial that would have seen the head of Viacom, Dauman, hauled into a Los Angeles courtroom as a witness to answer questions about his interactions with Sumner Redstone. The case has already been a distraction for Viacom, which has seen its fortunes plummet in the last two years.

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A trial also would have put Shari Redstone in an uncomfortable position of testifying about her sometimes tumultuous relationship with her famously stubborn father.

Herzer's side had been lobbying for a settlement for months. Avoiding a trial means that Herzer would no longer have to account for her spending while she lived at Redstone's home.

Shari Redstone in February filed a declaration in the case, saying that she believed that Herzer already had received $70 million in cash and other assets from Sumner Redstone from 2009 through 2015.

Herzer met Redstone at a dinner party around 1999 and two became romantically involved. She testified that Redstone once asked her to marry him but she declined. He wed another woman but that marriage ended in divorce in 2008, and Redstone rekindled his friendship with Herzer again. In the last three years, she and another woman were very involved in Redstone's life and his day-to-day affairs.

At one point, Redstone put Herzer and another former girlfriend, Sydney Holland, in charge of his funeral plans. But Redstone ordered Holland out of his life in early September when he learned of her infidelity, according to court documents. At that time, Redstone named Herzer as the agent in charge of his advance health care directive.

Earlier this week, Sumner Redstone agreed to change his advance healthcare directive, naming his daughter as his proxy should he become unable to make decisions for himself. Shari Redstone replaced Dauman, who was named the healthcare proxy last fall by Redstone when the mogul decided to end his relationship with Herzer.

Herzer brought the competency claim in late November to challenge her removal in mid-October as Redstone's healthcare agent. Her case picked up steam after a doctor hired by Herzer's team examined Redstone at his mansion in late January.

Viacom shares closed down nearly 3%, or $1.17, to $38.27. CBS shares fell 2.3%, or $1.27, to $53.58.

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