Nephew sues Redstone over stake in business

In the latest feud within the Redstone clan, the nephew of Viacom Inc. Chairman Sumner M. Redstone is suing the media mogul for allegedly cutting him and his late sister out of their stake in the family business -- a stake that could be worth more than $1 billion today.

The fight is over National Amusements, the controlling shareholder of Viacom, CBS Corp. and video game maker Midway Games Inc., which portrayed the lawsuit as a “meritless” action by a relative, Michael D. Redstone, who was ungrateful for his uncle’s generosity.

“Mr. Redstone essentially rescued Michael from a difficult family environment, removed him from a mental institution, paid for his education and gave him a job” at National Amusements, the company, which owns a chain of movie theaters, said in a statement Monday.

The lawsuit marks the latest instance in which discord among the Redstones has erupted in a legal fight. Family members have been suing one another -- and airing their dirty laundry in public -- for at least 35 years.

Redstone’s son, Brent, sued him in February, accusing his father of “self-dealing” and “misappropriating millions of dollars” from National Amusements, the Dedham, Mass.based company that his sister, Shari, now runs. That lawsuit sought the breakup of National Amusements so that Brent could cash out his one-sixth share. Reached at his home in Denver on Monday, Brent declined to comment.

The suit by nephew Michael, 48, of Needham, Mass., also names his father, Edward S. Redstone of Rancho Mirage, and National Amusements as defendants. Filed Nov. 3 in Massachusetts Superior Court in Boston, the suit alleges that Sumner and Edward contravened the wishes of their own parents, Mickey and Belle Redstone, who in 1959 had directed that half of National Amusements’ 300 shares of stock be held in trust for the benefit of their grandchildren -- Brent, Shari, Michael and his sister, Ruth Ann.

Instead, according to Michael Redstone’s legal complaint, in the 1972 settlement of a lawsuit that Edward had brought a year earlier against his father and brother, Edward accepted $5 million and agreed to reduce the number of shares set aside in trust for his children to 33 1/3, from 50. The complaint states that Sumner inserted provisions in the agreement naming himself the sole trustee of the trust for Michael and Ruth Ann and allowing National Amusements to buy back their shares at a later time if Sumner decided it was in their best interest.

In 1984, Sumner agreed to sell back their shares and those of a separate trust for all four grandchildren for a total of $21.4 million, the complaint states. The shares represented about a 45% ownership stake in National Amusements, according to the complaint. Beginning in the late 1980s, Sumner used National Amusements to acquire Viacom, the owner of MTV and Nickelodeon that went on to purchase Paramount Pictures and CBS.

Redstone’s fortune is worth an estimated $8 billion today.

Michael alleges that the 1972 and 1984 transactions were rife with conflicts of interest and that no independent counsel was appointed to protect his and Ruth Ann’s interests.

Ruth Ann died in Japan in 1987 at age 33, having been out of contact with her family for years. She left a 3-year-old son, Gabriel, who was raised by Edward and his wife and died in a motorcycle crash at age 20, in 2004.

Shortly afterward, Edward went to court to prevent a $6-million trust payment from going to Michael. Edward argued that he was entitled to compensation for the expense incurred in raising his daughter and her child. The court ruled against Edward.

It was during discovery in that legal action that details surfaced about the 1972 and 1984 transactions involving the trusts, according to the complaint in Michael’s lawsuit.

“Sumner and Edward had never disclosed these documents or their contents, concealing their self-dealing and breaches of duties at the expense of the trust beneficiaries,” the complaint states. Michael seeks to have the two transactions rescinded and the trusts’ ownership stakes in National Amusements restored.

In a statement, National Amusements spokeswoman Brandy Bergman said the lawsuit amounted to “knowingly baseless allegations regarding entirely proper transactions that occurred decades ago.”

She said the company would defend itself vigorously.

“This suit is particularly troubling considering the important role Sumner Redstone has played helping Michael overcome serious obstacles throughout his life,” she added.

Sumner Redstone declined to comment Monday, but in his 2001 autobiography, “A Passion to Win,” he wrote that Michael was “a difficult child and for many years estranged from his parents. I had a lot to do with bringing Michael up, literally forcing him to go to college and then to get a business degree.”

Before college, Michael was institutionalized for a time, and Sumner was instrumental in getting him released, according to a person familiar with Sumner’s potential legal defense who declined to be identified because of the pending lawsuit. The person said that if the case reached trial, there would be evidence that Michael was aware of the facts surrounding the 1972 and 1984 transactions well before his father’s 2004 legal action.

Neither Michael Redstone nor his lawyer returned phone calls.

thomas.mulligan@latimes.com