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War of the Redstones: Next salvo
POSTED: 10:10 a.m. EDT, July 23,2007

Behind-the-scenes, the drama between Sumner Redstone and his daughter and presumed successor Shari is escalating. FORTUNE has learned that Shari is raising questions about self-dealing on Sumner's part that echo accusations made in earlier lawsuits by other kin as well as claims that Sumner misused funds held by the family company for his own benefit.

These accusations could prove a valuable weapon for Shari in negotiations about her possible exit from the family media business, which includes controlling stakes in Viacom and CBS, as well as in court, where it seems most Redstone family conflicts end up.

As detailed last week by FORTUNE, father and daughter have dueled over a number of matters, including corporate governance issues and Shari's efforts to more closely tie executive compensation with shareholder returns.

But the spat over corporate governance, while real, is merely one element of a deeper conflict that involves issues of control that have long roiled the Redstone family - namely how Sumner maneuvered his way to control of the family enterprise through the 1984 redemption of stocks held in trusts for his children and his brother Edward's children.

In addition, another serious flashpoint in the deteriorating relationship has been how funds held by National Amusements - the Massachusetts-based theater chain that is the vehicle for Sumner's control of Viacom (Charts) and CBS (Charts, Fortune 500) - have been spent.

This includes, among other instances, the previously-reported redemption of stock by Sumner in a slot machine company held by National Amusements to make a charitable donation to a Boston hospital in his own name. Shari felt she should be entitled to a similar distribution to make her own donation, or at the very least the hospital donation should have been made in the name of National Amusements.

As for the potential of a lawsuit, a representative for Shari said, "We certainly hope that it never comes to that point. But Shari will protect her rights and those of her children."

From: CNNMoney
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