CBS CEO Les Moonves was forced to leave the company after numerous allegations of sexual misconduct came to light. Now Moonves is coming under fire again, facing new allegations of insider trading. A lawsuit filed recently claims that he and other CBS executives sold off massive amounts of CBS stock shortly before the sexual misconduct scandal became public.
The New Yorker published an exposé in July of 2018 detailing Moonves’ alleged misconduct, which included unwanted sexual advances, from the perspectives of six female employees. Moonves was terminated, and the company denied him his $120 million severance package. The report came shortly after similar allegations were levied against Roger Ailes at Fox News, forcing his departure from the network. The ouster of Ailes gave CBS’s stock a temporary boost, as the company touted its commitment to a zero-tolerance workplace. When the news about Moonves and the prevalence of sexual harassment at CBS became public, the stock price dropped dramatically.
Large Stock Transfers Timed to Avoid Drop in Price
In the months leading up to the release of the exposé on Moonves, he and three other CBS executives cashed in large amounts of stock, taking advantage of the inflated price. Combined, the four of them sold more than 3.4 million shares of stock totaling over $200 million in 2017 and early 2018. The timing of the sales raised suspicions for shareholders, who had already filed a lawsuit against the company after the exposé was released. The initial lawsuit claimed that CBS had deliberately misled shareholders in hiding the truth about its corporate culture.
Now a new complaint has been added to the original lawsuit. The complaint names Moonves and two of the other executives as defendants, alleging that the executives knew about the article and an ongoing LAPD investigation, and that they made the trades in anticipation of their effect on the company’s stock. Not only did they fail to disclose this information to shareholders, they also used it for their own personal gain in illegal trades. CBS has released a statement denying any wrongdoing, saying that most of the stock sales were part of existing selling arrangements and were compliant with securities laws. The others were pre-cleared by CBS and disclosed according to the law.
Companies are required to disclose information that could potentially impact their stock price. It is illegal for employees of a company to use non-public information to make trades. Whether or not the sales by CBS executives can be considered securities fraud depends on a number of factors, including how aware they were of the impending allegations at the time they made the trades and how far in advance they were scheduled.
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