CBS Insider Trading Suit
Several current and former CBS Corp. executives engaged in insider trading in advance of sexual-harassment allegations against former Chairman and Chief Executive Leslie Moonves becoming public, according to a shareholder lawsuit seeking class-action status against the company.
Moonves, acting CEO Joe Ianniello, chief accounting officer Lawrence Liding and former communications chief Gil Schwartz collectively sold more than 3.4 million shares worth over $200 million before the company’s July disclosure that it would investigate Moonves, according to an amended complaint filed Monday in federal court in the Southern District of New York by the Construction Laborers Pension Trust for Southern California.
“The timing and amount of the Class Period CBS stock sales by these executives were unusual and suspicious, and further demonstrate defendants Moonves, [then COO Joseph] Ianniello and [chief accounting officer Larry] Liding’s motive to commit fraud.”
The amended complaint includes a chart of the movement of CBS’ stock dating all the way back to the time that Roger Ailes resigned from Fox News following allegations of sexual harassment from Gretchen Carlson and others. The story in the suit that is told is that while CBS was telling everyone that it was committed to zero-tolerance sexual misconduct and as Moonves was being hailed as a steward of stability, CBS’ culture was rotten, and that executives had affirmative duties to do something.
CBS’ share price rose significantly in the months following Ailes’ departure, and while other factors might have been responsible for this, the company’s stock price was relatively stable when allegations against Harvey Weinstein set off the #metoo movement. At the time, as noted in the chart, Moonves called #metoo “a watershed movement, adding “it’s important that a company’s culture not allow this.”
The plaintiffs raise various legal theories about CBS’ alleged need to disclose the truth about the sexual misconduct of its top executive, from 10-K warnings about the potential impact from the loss of any key personnel to Item 303 of SEC Regulation S-K, said to require disclosure of “known trends and uncertainties.”