A lawsuit filed last August by a California pension fund against CBS Corp. for failing to disclose sexual harassment allegations against former CEO Les Moonves has been amended to include accusations of insider trading among the media company’s executives.
The new complaint, which was filed earlier this month by the Construction Laborers Pension Trust for Southern California, said Moonves, interim CEO Joseph Ianniello, Chief Accounting Officer Lawrence Liding, and former Chief Communications Officer Gil Schwartz sold 3.4 million shares worth more than $200 million during 2017 and 2018 before allegations against Moonves became public.
“The timing and amount of the Class Period CBS stock sales by these executives were unusual and suspicious, and further demonstrate defendants Moonves, Ianniello, and Liding’s motive to commit fraud,” said the complaint.
The company said Moonves was reported to have known about a criminal investigation into sexual assault allegations against him as early as November 2017, and believed by early December 2017 “that an article about him would be published imminently” that could detail accusations of sexual misconduct and assault.
“Yet Moonves sold over $53 million worth of stock between mid-December 2017 and May 2018, even as inquiries into his past continued to percolate,” said the complaint.The complaint also alleged that Ianniello sold more than $19 million worth of stock between January and June 2018, despite reports that by December 2017, CBS executives had been told that reporters for The New York Times and The Wall Street Journal were asking around about sexual harassment allegations involving Moonves. It also alleged that while The New York Times reported that Schwartz had known about certain sexual assault allegations against Moonves in November 2017, he sold $8.8 million of shares on June 14, 2018, shortly before The New Yorker magazine published an exposé on Moonves and CBS in July.
“Taken collectively, these insider sales support an inference of scienter because they were timed to capitalize on CBS’s inflated stock price before defendant Moonves’s misconduct and the pervasive sexual harassment that permeated the Company was revealed to the market,” said the complaint.
However, CBS denied that the executives selling the shares did so to beat the news about Moonves.
“The vast majority of sales mentioned in this complaint were made as part of pre-planned selling arrangements designed to comply with applicable securities laws,” said CBS in response to the complaint. “The remaining sales were subject to CBS’ customary pre-clearance policies and procedures and were properly disclosed. We believe that our policies and procedures are fully in compliance with law.”
The lawsuit, which was first filed in August 2018, accuses CBS of making “materially false and misleading statements” regarding the company’s business, operational and compliance policies. Specifically, it accused the company of failing to disclose that CBS executives had engaged in widespread workplace sexual harassment at CBS. It also said that the company’s “enforcement of its own purported policies was inadequate to prevent the foregoing conduct.”
The suit adds that because of the executives’ position with the company, and their access to material information not available to the public, that “they knew that the adverse facts had not been disclosed to and were being concealed from the public.”