N.Y. Attorney General Letitia James Secures $30.5 Million Settlement From CBS, Former CEO Leslie Moonves for Insider Trading and Concealing Sexual Assault Allegations

New York Attorney General Letitia James Nov. 2 announced that the state prosecutor’s office secured a $30.5 million settlement from CBS and former CEO Leslie Moonves for concealing sexual assault allegations against the executive, misleading investors about those allegations, and insider trading.

CBS, which remerged with Viacom to become Paramount Global in February, is required to pay $28 million, $22 million of which will go back to CBS shareholders and $6 million to strengthening mechanisms for reporting and investigating complaints of sexual harassment and assault. In addition, any stock trade made by a senior executive of CBS must be specifically approved by the company’s chief legal officer.

Moonves is required to pay $2.5 million, which will go to CBS shareholders. In total, CBS shareholders will receive $24.5 million. Additionally, for the next five years, Moonves is not allowed to serve as an officer or director of any public company doing business in New York without written approval by OAG.

The investigation found that CBS and its senior leadership knew about multiple allegations of sexual assault made against Moonves and intentionally concealed those allegations from regulators, shareholders and the public for months. The investigation also revealed that another senior executive at CBS — one of the few people who knew about the allegations — sold millions of dollars of CBS stock in the weeks before the allegations became public.

Moonves, who had been positioning himself to become CEO of  ViacomCBS, resigned in 2018 following the allegations. The company is now headed by former Viacom CEO Bob Bakish.

“CBS and Leslie Moonves’ attempts to silence victims, lie to the public, and mislead investors can only be described as reprehensible,” 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 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.”

According to OAG, at the height of the #MeToo movement, CBS and Moonves became aware of several sexual assault allegations against the longtime executive and tried to conceal them from the public. The investigation also unearthed information about an LAPD captain’s direct and repeated interference with the investigation.

Specifically, on the day an individual filed a confidential criminal sexual assault complaint against Moonves at an LAPD station in Hollywood, the LAPD captain informed a CBS executive of the confidential complaint. The captain shared an unredacted police report with the executive, who shared it with Moonves and other executives at CBS.

As CBS allegedly tried to hide the allegations, OAG disclosed that the media company authorized its former chief communications officer, Gil Schwartz, who was aware of the allegations and the LAPD police report, to sell his shares. Six weeks before the first news article about the allegations became public, Schwartz sold 160,709 shares of CBS stock at an average price of $55.08 for a total of $8,851,852. The stock dropped almost 11% in value from the day before the news broke to the trading day after.

The settlement also requires CBS to continue its obligations under OAG’s Civil Rights Bureau’s agreement, which requires CBS to conduct annual employee surveys about the work climate within CBS, submit its sexual harassment training to OAG for review, enhance its outreach and recruitment efforts to hire more women at all levels of management, and financially commit to fund human resources reforms within CBS.

SEC, Wash. State File Insider Trading Complaints Against Three Former Netflix Employees

The U.S. Securities and Exchange Commission and U.S. District Attorney for the state of Washington have filed separate criminal complaints against three former Netflix engineers who allegedly used non-public information on the streamer’s subscriber growth to generate $3 million in personal stock market gains.

Netflix’s subscriber growth has been a key driver in the SVOD pioneer’s skyrocketing market valuation and enrichment of shareholders. The service ended the most recent fiscal period with more than 209 million subscribers.

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The complaints, filed in federal court in Seattle, allege Sung Mo Jun, an engineer at Netflix from 2016 to 2017, tipped his brother, Joon Mo Jun, and accomplice Junwoo Chon in advance of quarterly earnings reports.

The complaint alleges that after Sung Mo Jun left Netflix, he continued to receive confidential sub growth data from Netflix employees Ayden Lee and Jae Hyeon Bae. The Jun brothers and Chon allegedly tried to cover their actions through cash kickbacks and encrypted messaging.

The SEC reportedly discovered the illegal actions after its internal software tracked the ongoing “improbably successful” stock trades.

Chon has pleaded guilty to the charges and is cooperating with officials. He awaits sentencing Dec. 3, according to Tess Gorman, Acting U.S. Attorney for the Western District of Washington. An insider trading conviction can bring up to 20 years in prison and $5 million fine.

“Insider trading is not a victimless crime,” Gorman said in a statement. “When someone on one side of the trade has non-public information, they have an advantage over the person on the other side — the person who ultimately loses money on their securities trade. The integrity of our financial markets demands a fair and level playing field.”