CBS Corp. executives sold more than $200 million in company shares before disclosing claims of sexual misconduct against former CEO Les Moonves and other network officials, a California pension fund claimed in an updated lawsuit.
A group of executives -- including Moonves, acting CEO Joseph Ianniello, Chief Accounting Officer Lawrence Liding and former Chief Communications Officer Gil Schwartz -- sold 3.4 million shares from the start of 2017 through mid-2018, before The New Yorker published allegations by women against Moonves and others at the network, according to the revised complaint, filed Feb. 11 by the Construction Laborers Pension Trust for Southern California.
The pension fund is the lead shareholder in a suit that seeks to represent claims by investors who say they were harmed when the market learned of the allegations against CBS executives and the company’s share price dropped.
CBS, which was also named as a defendant, said in a statement that it has policies barring senior executives from selling stock based on inside information.
“The vast majority of sales mentioned in this complaint were made as part of pre-planned selling arrangements designed to comply with applicable securities laws,” the network said. “The remaining sales were subject to CBS’ customary pre-clearance policies and procedures and were properly disclosed.”
U.S. District Judge Valerie Caproni hasn’t yet ruled on whether the case can go forward as a class action on behalf of all purchasers of CBS Class A and Class B common stock from Sept. 26, 2016, to Dec. 4, 2018.
“The timing and amount of the class-period CBS stock sales by these executives were unusual and suspicious, and further demonstrate defendant Moonves, Ianniello and Liding’s motive to commit fraud,” the pension fund said in its amended complaint, which was reported earlier by The Hollywood Reporter.
Moonves “denies any wrongdoing,” his spokesman, Chris Giglio, said in an email Feb. 12. “The stock sales in question were made in accordance with an approved SEC Rule 10b5-1 stock sale plan.”
Schwartz didn’t immediately respond to a voicemail seeking comment on the lawsuit.
A longtime lieutenant to Moonves, Ianniello became interim chief executive officer after his boss left the company and is considered a possible permanent successor. The CBS board has hired an executive search firm and has been considering a number of candidates. Looming over the board’s decision is the chance of a recombination with Viacom Inc., which, like CBS, is controlled by the Redstone family.
CBS failed to tell investors that it was “beset by a company-wide pattern and practice of sexual harassment, creating a ‘culture of fear’ and hostile work environment that exposed the company to significant reputational risk and the potential loss of key executives,” the most notable being Moonves, the pension fund said in its amended complaint.
The pension fund called Moonves “a titan of the entertainment industry” who was praised by Wall Street for his business acumen and programming ability. At the same time, he was creating a toxic work atmosphere that included allegations of sexual assault, it said.
The day after news of the New Yorker article became public, CBS shares fell 6 percent on heavy volume, their biggest one-day drop in 11 years, according to the fund. The original case was filed in August, within weeks of the New Yorker story.
The case is Samit v. CBS Corp., S.D.N.Y., No. 18-cv-07796, amended complaint filed 2/11/19.
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