Class action claims Redstone inflated CBS

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Class action claims Redstone inflated CBS

Tue Oct 06, 2009 @ 10:07AM PST

By Eriq Gardner

Sumner_redstone Class action lawsuits are a dime a dozen. Almost any major corporate transaction or announcement will trigger a filing thanks to the incentives that plaintiffs lawyers have in bringing these cases.

But a new class action filed in New York federal court against CBS and members of its corporate board caught our attention.

Lead plaintiff Curt Hatcher is claiming that CBS cooked its books in order to help topper Sumner Redstone avoid payments on a loan. Allegedly, Redstone borrowed $1.6 billion with the contingency that he'd make multimillion-dollar payments on the loan if CBS stock fell below a certain price. To avoid that outcome, in 2008 CBS purportedly ignored drops in goodwill assets like FCC licenses when calculating its assets, inflated its worth by $14 billion and touted its "strong" and "pristine" balance sheet.

Later that year, CBS announced a $14 billion write-down of goodwill and other assets hurt by the economic turmoil, sending shares of the stock down 20 percent.

Hatcher's lawsuit demands damages, restitution and an order requiring CBS to reform corporate governance and board oversight.

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The Hollywood Reporter, Esq. blog focuses on how the entertainment and media industries are impacted and influenced by the law. It is edited by Matthew Belloni with contributions from veteran legal reporter Eriq Gardner and others. Before joining The Hollywood Reporter, Belloni was a lawyer at an entertainment litigation firm in Los Angeles. He writes a column for THR devoted to entertainment law. Gardner is a New York-based writer and legal journalist. Send tips or comments to [email protected]

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