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Dysfunctional Family Businesses: Viacom

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Giving new meaning to "being treated like a member of the family."

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Sumner Redstone likes to boast that at Viacom (VIA) he treats "everyone like a member of my family." But being treated like a member of the Redstone family is not likely to figure highly into any sane human being's wish list.

Suing family members is a time-honored Redstone tradition. Forbes went so far as to dub the Redstone clan as "a Shakespearean tragedy, involving unhappy childhoods, bitter accusations by Sumner's son and nephew that he cheated them out of their inheritances, and, on the periphery, untimely deaths, mental illness and drug abuse."

In 1954, Sumner joined his father Mickey's company, which at the time consisted of three drive-in theaters (it would go on to become National Amusements). His brother Edward was already working there.

In 1971, Edward sued both of them, seeking to liquidate his shares amid infighting. In 1972, the matter was settled, with Edward accepting $5 million for two-thirds of his stake, while the other third was split between his children, Ruth Ann and Michael. Sumner gave control of 33% of his shares to his kids, Brent and Shari.

In 1987, Redstone emerged victorious in a hostile takeover bid for Viacom by ponying up $780 million in cash plus $2.2 billion in debt. In 1996, he became its CEO.

In his 2001 autobiography, Sumner was the epitome of a proud uncle, writing, "Eddie's son, my nephew Michael, was a difficult child and for many years was estranged from his parents. Today, Michael is a likable and productive employee of National Amusements. He is doing a great job and his parents and I are all proud of him."

Viacom Sumner Redstone
Three years later, Sumner apparently didn't find Michael all that likable anymore, when Michael filed a lawsuit claiming Sumner was cheating him out of money.

"I never wish to talk to Michael again," he said. "He came close to ruining my reputation after I got him out of a nuthouse, brought him up and gave him a job at National Amusements."

Around the same time, Michael's cousin Brent --- Sumner's son -- filed a suit against Sumner for allegedly misleading him about the company's profits, thus causing him to sell back his stake in National Amusements for too little. The case was thrown out, as the court decided the suit should have been filed earlier and was no longer valid. Brent settled a year later for $240 million, and the stage was set for his sister Shari, whom Sumner once called a "clone" of himself to be named Non-Executive Vice Chairman of Viacom.

Then the feud between Shari and her father began.

Shari attempted to increase the number of independent directors and outside oversight on the Viacom board and wanted to institute performance-driven compensation. This angered Sumner who, when talking to a reporter about his succession plan, said of his "clone" Shari, "The reason she won't succeed me is that she isn't qualified."

But this past February, Redstone said that he and Shari "have a very loving relationship - she has been the love of my life." Funny then, that he shows his "love" by communicating with his daughter almost entirely in written form or through spokespeople.

Now, before you jump to the conclusion that Sumner Redstone isn't a nice man, consider this statement he made recently: "Talk to people who work for me. They love me."
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No positions in stocks mentioned.

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