UPDATING with details from New York Attorney General’s Office settlement.
Paramount Global and former CBS chief Leslie Moonves have reached a settlement with New York state as part of an investigation that uncovered new allegations of a cover-up and insider stock sales within CBS as sexual misconduct accusations against Moonves began to come to light in 2017 and 2018.
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The deal calls for Paramount Global, the parent company of CBS, to pay a total of about $22 million to be redistributed to shareholders, while another $2.5 million is to come from Moonves, who was terminated as chairman-CEO in September 2018. The settlement with the Attorney General’s Investor Protection Bureau related to class-action shareholder lawsuits and litigation asserting that Moonves and key CBS executives mislead executives by not disclosing Moonves’ vulnerabilities to explosive #MeToo allegations. The AG’s settlement report asserts that Moonves and CBS were motivated to keep sexual misconduct allegations from going public out of concern for a scandal’s impact on CBS stock price.
The details disclosed Nov. 2 by New York Attorney General Letitia James paint a damning picture of CEO who knew he was vulnerable to #MeToo allegations but was desperate hang on to power. The settlement brings to a close two class-action lawsuits filed in 2018 that were previously settled but re-opened by James as part of her broader investigations into complaints at CBS Corp., which is now part of Paramount Global.
“CBS and Leslie Moonves’ attempts to silence victims, lie to the public, and mislead investors can only be described as reprehensible,” said James said in a statement. “As a publicly traded company, CBS failed its most basic duty to be honest and transparent with the public and investors. After trying to bury the truth to protect their fortunes, today CBS and Leslie Moonves are paying millions of dollars for their wrongdoing. Today’s action should send a strong message to companies across New York that profiting off injustice will not be tolerated and those who violate the law will be held accountable.”
Moonves declined to comment through a spokesman. Paramount Global emphasized that the matter involved the previous regime at a much-changed company. As part of the settlement, Moonves is also barred from serving as an officer of a public company doing business in New York without approval from the Attorney General.
“We are pleased to resolve this matter concerning events from 2018 with the New York Attorney General’s office, without any admission of liability or wrongdoing,” Paramount said. “The matter involved alleged misconduct by CBS’s former CEO, who was terminated for cause in 2018, and does not relate in any way to the current company.”
The paperwork about the case was disclosed as part of Paramount Global’s third-quarter earnings report released Nov. 2. A mention of a portion of the Moonves-related settlement with New York state was included in the company’s early-morning 8K earnings filing with the Security and Exchange Commission. A $14.7 million settlement related to the filing related to the long-running class-action litigation filed around the controversy that ended Moonves’ 23-year tenure at CBS. The additional payments come as part of a settlement with the Investor Protection Bureau of New York State Attorney General’s Office.
“Moonves and CBS persistently suppressed and concealed material information concerning the substantial risk that Moonves’ position would be jeopardized and the corresponding negative impact his departure would have on CBS and its stock,” the 37-page report states.
CBS violated state laws in 2017 by promoting “the strength and longevity of its executive team while knowing that the departure of Moonves was a material risk to the company. CBS was obligated to accurately disclose and update its disclosures, in particular, in its proxy statements and other SEC filings, but instead Respondents covered it up.”
Moonves’ public comment on the need to address sexual harassment issues in the workplace, made in response to a question at Variety‘s Entertainment and Technology conference in November 2017, became problematic for the company after class-action lawsuits claimed the then-CBS chief executive mislead shareholders. Allegations that Moonves had a long history of sexual misconduct with multiple women made international headlines in the late summer and fall of 2018 through exposes in the New Yorker and by the New York Times.
Two federal class-action shareholder lawsuits were filed in the Southern District of New York in the wake of Moonves’ ouster. The cases were consolidated into one in late 2018. The Attorney General’s investigation found that CBS executives were aware in 2017 that #MeToo rumors about Moonves were circulating through Hollywood.
Moreover, the settlement report features text messages and email correspondence among CBS executives that is likely to spark an inquiry at the Los Angeles Police Department. An unidentified LAPD captain who has previously worked as a security guard for Moonves is accused of tipping off CBS talent relations executive Ian Metrose in November 2017 that a woman had just made a police report against Moonves over incidents from the 1980s.
“At approximately 3:00 PM on November 10, 2017, Complainant #1 walked into an LAPD station house in the Hollywood Division, requested to speak with a female officer about a sexual assault, and reported that she had been sexually assaulted by Moonves and subjected to sexual misconduct and retaliation in the workplace by him in the 1980s (the “Police Report”), prior to his employment with CBS. Complainant #1 affirmatively requested that her report to the LAPD be kept confidential in a document affixed to the Police Report entitled “Request for Confidentiality of Information.” The Police Report itself was marked “confidential” three times,” the Attorney General’s report states.
The AG’s report details the lengths to which the investigation found that Moonves and a handful of executives went to obtain information from the LAPD and keep the police report from surfacing.
“Over the next few days and months, the LAPD Captain continued to secretly provide Moonves and CBS executives with status updates on the LAPD’s investigation,” the report states. “The LAPD Captain made it clear that he was willing to intervene on Moonves’ behalf and Moonves solicited the LAPD Captain’s assistance. Moonves put the LAPD Captain in touch with Moonves’ personal attorney, and the LAPD Captain put the officers under his command in touch with Moonves (via Metrose) and Moonves’ counsel.”
As was reported in detail by the New York Times in November 2018, the AG report also details efforts in 2017 and 2018 to keep another female actor and her “Talent Manager,” as he is identified in the report, from going public about an alleged past incident with Moonves.
The New York AG report also takes a deep dive into the sale of about 160,700 shares of CBS stock, for about $8.8 million, in June 2018 by Gil Schwartz, who was then CBS head of communications. Schwartz died in May 2020 at age 68. The AG report asserts that CBS assisted Schwartz in insider trading because he was aware of the existence of the LAPD report with allegations against Moonves.
“Despite Schwartz’s knowledge of the Police Report and that a #MeToo story about Moonves would likely be published, Schwartz sold 160,709 shares of CBS class B common stock at an average weighted price of $55.08 for a total of $8,851,852. Schwartz could not have traded without CBS’ preapproval,” the report states.
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