Overview

As we reported a week ago, Sumner Redstone should not have sold $12 million in Viacom stock on 9/14, in the midst of Rathergate, and in possession of material non-public information about CBS’s increasing problems because of the scandal. Our opinion is even stronger today.

Here’s what Sumner Redstone said to TIME magazine, as reported by Drudge:

“Let me first give you some perspective. Neither I nor any executive at Viacom has any access to or plays any role in the news reports that come from CBS. Like you, we read about them in the newspapers. Notwithstanding that, I have, for obvious reasons, been carefully monitoring the situation. I have been talking continually with [CBS president] Les Moonves…”

Redstone sold the $12 million in Viacom stock on September 14. By the time, the Rathergate memos had been dissected by every blog to the right of Joshua Micah Marshall, so Mr. Redstone knew what the story was if he followed Powerline, Little Green Footballs, Instapundit, or even Slate. We suspect he does not, however.

Rathergate Timetable in the Mainstream Media

He or Mr. Moonves probably reads the New York Times, however, which reported on September 12 that a key CBS source for corroboration (General Hodges) no longer backed the documents, or the New York Times of September 13, in which William Safire wrote in his column entitled “Those Discredited Memos:”

When the mainstream press checked the sources mentioned or ignored by ”60 Minutes II,” the story came apart.

The Los Angeles Times checked with Killian’s former commander, the retired Guard general whom a CBS executive had said would be the ”trump card” in corroborating its charges. But it turns out CBS had only read Maj. Gen. Bobby Hodges the purported memos on the phone, and did not trouble to show them to him. Hodges now says he was ”misled” — he thought the memos were handwritten — and believes the machine-produced ”documents” to be forgeries. (CBS accuses the officer of changing his story.)

The L.A. Times also checked out a handwriting analyst, Marcel Matley (of Vincent Foster suicide-note fame), who CBS had claimed vouched for the authenticity of four memos. It turns out he vouches for only one signature, and no scribbled initials, and has no opinion about the typography of any of the supposed memos.

The Dallas Morning News looked into the charge in one of the possible forgeries dated Aug. 18, 1973, that a commander of a Texas Air Guard squadron was trying to ‘’sugar coat” Bush’s service record. It found that the commander had retired from the Guard 18 months before that.

Mr. Redstone or Mr. Moonves probably reads the Washington Post, in which Michael Dobbs and Howard Kurtz wrote in the September 14 edition:

A detailed comparison by The Washington Post of memos obtained by CBS News with authenticated documents on Bush’s National Guard service reveals dozens of inconsistencies, ranging from conflicting military terminology to different word-processing techniques.

The analysis shows that half a dozen Killian memos released earlier by the military were written with a standard typewriter using different formatting techniques from those characteristic of computer-generated documents. CBS’s Killian memos bear numerous signs that are more consistent with modern-day word-processing programs, particularly Microsoft Word.

“I am personally 100 percent sure that they are fake,” said Joseph M. Newcomer, author of several books on Windows programming, who worked on electronic typesetting techniques in the early 1970s. Newcomer said he had produced virtually exact replicas of the CBS documents using Microsoft Word formatting and the Times New Roman font.

Newcomer drew an analogy with an art expert trying to determine whether a painting of unknown provenance was painted by Leonardo Da Vinci. “If I was looking for a Da Vinci, I would look for characteristic brush strokes,” he said. “If I found something that was painted with a modern synthetic brush, I would know that I have a forgery.”

Meanwhile, Laura Bush became the first person from the White House to say the documents are likely forgeries. “You know they are probably altered,” she told Radio Iowa in Des Moines yesterday. “And they probably are forgeries, and I think that’s terrible, really.”

Maybe they read John Podhoretz’s cleverly titled CBS Forges Ahead in the NY Post on Sept. 14, or James Pinkerton’s column in Newsday the same day, or rival ABC’s report that day, or the Baltimore Sun or the New York Sun from the day before. Maybe they read, even earlier, the article in USA Today on Sept. 12, or the LA Times from that day. Or the Washington Times article of Sept. 12 unabiguously titled: Bush Guard Papers Forged.

Mr. Redstone sold his stock at $35 and you can’t

First of all, let’s acknowledge up from that, with the Viacom CEO owning 104,345,072 shares of the Class B stock alone (plus 70% of Class A plus Blockbuster stock, etc.), there is no way that selling $12 million of stock is econoimically material to him. But that is not the point. Here is the Viacom stock chart, by the way, which shows that the Viacom stock never hit $35 again after Redstone sold the shares:

The point continues to be that redstone knew that Dan Rather’s ratings had plummeted, which was reported publicly two days after he sold the stock, by Drudge. Redstone and Moonves knew of the intense dissatisfaction at many affiliates, which had not been publicly reported at the time. As USA Today noted on 9/23:

Meanwhile, an AM radio station in Norfolk, Va., said that anger over CBS’ handling of the controversy prompted it to replace CBS as its news provider. “The outrage from our listeners has been deafening,” said Dave Morgan, operations manager of WNIS, which switched to ABC News. CBS said WNIS is the only one of its 1,000 radio affiliates to have defected. But CBS staffers said television affiliates continued to express alarm at the public anger toward the network, which they fear will hurt them locally.

The plunge in Rather’s ratings and the outrage at affiliates were material inside information at Viacom as of September 14, 2004; hence, the stock sale should not have taken place — period.

Furthermore, we also know now that the stock sale did not take place according to an SEC Rule 10b5-1 Plan, under which executives make periodic, planned and automatic stock sales in their own companies to diversify their holdings. Redstone’s sale of Viacom shares was his only such transaction for the last two years. His simultaneous exercise of options and selling the shares they converted into was intended to profit by the spread between the exercise price of $15.25 per share and his sale price of $35 per share.

Where are the lawyers? For that matter, where are the journalists?

Viacom’s and CBS’s lawyers should have been involved in vetting the stock sale taking place almost a week into the Rathergate scandal, and following the elite media’s extensive discussion of the document fraud, not to mention the non-public CBS News ratings issues, and the big problems with the network’s affiliates. Yet none of this apparently happened, at least that we know about.

Curiously, or perhaps we should say incuriously, the TIME Magazine report by Neil Gough did not mention the stock sale at all. Can you imagine an interview of Ken Lay or Martha Stewart or virtually any CEO who sold some stock at a questionable moment, wherein the reporter does not even bother to ask about it? Suppose it had been Rupert Murdoch.

This entry was posted on Sunday, September 26th, 2004 at 1:39 pm and is filed under General, New Media, Red Shift. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.