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December 2006

The New Establishment


Sleeping with the Fishes
Happy at last, Sumner Redstone is still far from mellowwitness his public trashing of superstar
Tom Cruise and firing of Viacom C.E.O. Tom Freston. At home in Beverly Hills, the 83-year-
old tycoon and his new wife, Paula, reveal their love story, her role in the Cruise decision, and
what he claims was Freston's big mistake.
by Bryan Burrough
Sumner Redstone
and one of the saltwater fishtanks in his home in Beverly Park, California, on October 6.
Photograph by Don Flood.
High on the slopes above Beverly Hills, so high the clouds sometimes waft beneath it, one of the
most exclusive enclaves in Southern California hides behind a pair of mammoth iron gates. If
you're expected, a security guard will push a button and the gates will slowly open. Inside lies
the cosseted world of Beverly Park, a collection of gargantuan mansions where the smallest
homes, the few with floor space under 20,000 square feet, rarely sell for less than $10 million.
Most aren't within view. This is a gated community where every home seems to have a high gate
of its own. Its long list of celebrity occupants includes Eddie Murphy, Sylvester Stallone, Barry
Bonds, Reba McEntire, Rod Stewart, Martin Lawrence, Mike Medavoy, and a slew of
Hollywood producers, and, oh yes, Denzel Washington, whose French-chteau-style mansion
clocks in at 60,000 square feet.
One of the cozier homes, among the few you can actually see from the street, belongs to Sumner
Redstone, the 83-year-old billionaire who controls both CBS and Viacom, whose flagship assets
include Paramount Pictures and MTV Networks, making Redstone the boss of everyone from
Katie Couric and David Letterman to, technically at least, with Paramount's recent purchase of
DreamWorks, David Geffen and Steven Spielberg. Redstone's home, tucked into a cul-de-sac
next to Stallone's, is a long, low building of pale gold whose entry is flanked by pools teeming
with koi and shoulder-high rushes. Down the hallway, to your left, is the indoor pool, where
Redstone swimsin the nudeevery afternoon. Also down the hall is the study where he
spends much of each day on the phone, surrounded by tanks of his beloved saltwater fish. Out
back, next to the infinity pool, with its 50-mile views over downtown, is the hot tub where
Redstone likes to shavein the nude, also. Right now there's a can of Gillette shaving cream
beside it.
This is the haven where, after spending most of the last two decades shuttling among hotel suites,
Redstone has finally, until recently at least, found in his twilight years something approximating
peaceand his happiness has much to do with the life he has built with his new, 44-year-old
wife, a sinewy onetime Manhattan schoolteacher named Paula Fortunato, now Paula Redstone. A
famous workaholic, Redstone withdrew here three years ago, turning over daily supervision of
his empire to his 52-year-old daughter, Shari, Viacom C.E.O. Tom Freston, 60, and the man who
runs CBS, Les Moonves, 57. Between games of tennis, scattering brine shrimp to his fish, and
sessions on the treadmillfully clothed, we're toldhe runs everything now by telephone.
Life in Beverly Park has its trials, however, even for a mogul of Redstone's heft. He had barely
adapted to his new routines when the rumors began to fly: that he was out of touch, that he had
lost his edge, that he was retiring. There were whispers about his health; down in Beverly Hills,
everyone seems to have a story about Redstone walking into a restaurant wall. The perception
that he was becoming irrelevant was reflected in the Vanity Fair New Establishment rankings
this fall, which saw him plunge from No. 3 in 2005 all the way to No. 30. Speculation about
what would happen to his empire on his passing, from who would run it to what would be sold,
rose by the month.
But then, in a span of less than two weeks, Redstone re-emerged this summer to fling two
thunderbolts that rocked the media world: the "firing'' of Tom Cruise from his lucrative
production deal at Paramounthe actually let Cruise's deal lapseand the actual firing of his
longtime confidant Freston, MTV's co-founder, after barely eight months at Viacom's helm. In
the media firestorms that ensued, Redstone thrust himself front and center, granting interview
after interview in which he savaged Cruise as an overpaid, ill-behaved symbol of a Hollywood
star system gone mad, and dismissed the popular Freston as an emperor who, he claims, fiddled
while the company's stock price burned.

More on Paramount:
The Siege of Paramount, by Bryan Burrough (February 1994)
Fort Sumner, by Judith Newman (November 1999)
Showdown at Fort Sumner, by Bryan Burrough (December 2007)
Both moves left veteran media-watchers scratching their heads, until all the chattering coalesced
into a single overarching theory: that Redstone fired Cruise and Freston merely to prove his own
continuing relevanceto prove he was still The Man. "I think Sumner will do anything for
attention. It's what started all this,'' says Sue Mengers, the Hollywood doyenne and onetime
superagent. "The consensus in the community is that what he did to Tom Cruise, and to Freston,
was outrageous, you know, just to prove he's still alive.'' Mengers compares Redstone to another
magnate who once owned Paramount, the late Charles Bluhdorn of Gulf & Western, an East
Coast emperor who, she feels, never understood the way Hollywood truly works.
An afternoon spent at the Redstone home doesn't entirely dispel the theory. Sitting in a straight-
backed chair in the living room, attired in an unfortunate blue plaid jacket and black shoes,
Redstone comes across as feisty as he did when he burst onto the financial scene, 20 years ago.
But he looks frail and has a senior moment or three, losing his train of thought, repeating stories,
and asking that a question or two be repeated. Still, he appears in total command, roundly
attacking Cruise and, while emphasizing how much he admires Freston, trashing him
nonetheless. He appears in command, that is, until the very end, when he stands to shake my
hand and, to my horror, suddenly lurches to one side and begins to fall.
Sumner of Love
In every man's life there is business and there is pleasure. Until the last few years, however,
Redstone's only pleasure was business. He is famously focused on his work; by his own
admission, every conversation, every dinner, every social outing had at least something to do
with Viacom or CBS. He is equally renowned for his crankiness, suing rivals, and warring with
his estranged son, Brent, 56, a Colorado attorney who has filed a lawsuit against his father
seeking to dissolve the family holding company, so he can take his shareestimated to be worth
more than $1 billionout of it. In person Redstone can be impatient and curt, snapping at
waiters and subordinates. During our interview, when his P.R. man tried to correct him,
Redstone barked, "Quiet!''
"He's not a man who has many friends,'' another Hollywood mogul told me, "and you know, I
see him a lot, and he doesn't know what a real friend is. He has no sense of other people. It's all
about him, and it always has been. He has a tremendous ego. But he has no grace. No charm.
Really, he's not loyal to anyone but himself. Before Paula came along, he was really all alone.''
Whatever Redstone lacks in charm he makes up for in intellect and sheer willpower; no one
doubts he is a very, very smart man. It was brains and will alone that drove Redstone from
relatively humble beginnings as head of his family's chain of more than 1,500 movie theaters,
National Amusements, which his father had started as a single Long Island drive-in with money
supplied mostly, as Judith Newman reported in a 1999 Vanity Fair profile, by an infamous
Boston bookie. By now almost everyone knows Redstone's backstory, how, after narrowly
surviving a 1979 fire at Boston's Copley Plaza Hotel that left his right hand a gnarled claw and
his legs severely burned, he re-dedicated himself to business, a commitment that in 1986 led to
his out-of-the-blue, all-or-nothing takeover of Viacom, then to the massive 199394 battle in
which he bested Barry Diller and half the moguls in Hollywood for control of Paramount, then to
the 2000 merger with CBS, then to the decision last year, enacted in the face of Viacom's
sagging stock price, to split the operations of Viacom and CBS into separate companies.
Through it all Redstone remained cantankerous and combative, a C.E.O. who viewed his stock
price as a barometer measuring his self-worth and, above all, a tireless worker who spent every
waking hour in his Times Square office because well, he had nothing else to do. (Redstone is
so obsessed with his stock price that his Lincoln Town Car is outfitted with a DirecTV satellite
dish on the roof so that he can watch CNBC.) What private life Redstone had was relegated to
hotel suites in Manhattan, first at the Carlyle hotel, later at the St. Regis. He was alone there,
separated from his wife of more than 50 years, Phyllis.
What changed it all, as so often happens, was a woman. At the heart of Redstone's new life, in
fact, is an unlikely love story, one he and Paula haven't discussed publicly until now. It began in
2001. Phyllis lived quietly in Boston, while he worked in New York. During the 1990s, Redstone
more or less openly dated other women, notably Christine Peters, ex-wife of producer Jon Peters.
Nothing, however, appeared to soften his sharp edges; subordinates viewed him as a crabby old
man who scoffed at executives who left before seven at night. A number of associates felt steady
companionship might make him happier, or at least make his twilight years less lonely.
One of Redstone's brokers at Bear Stearns, Steven Sweetwood, who supervises Viacom's stock-
buyback plans, was ruminating about the situation with another Bear Stearns executive when the
second executive mentioned that his wife had a friend, an elementary-school teacher, who had
never married. The two Wall Streeters conspired to arrange a blind date.
"Let me tell you the story,'' Paula Redstone says. A slim, attractive brunette, she leans forward on
the edge of a sofa to Redstone's left, elbows on knees, as we talk. The two have been inseparable
since marrying in April 2003, never spending a night apart. At industry conferences, parties, and
just about anywhere Redstone is seen these days, she is at his side. Lately she's even been spotted
sitting in on meetings at Viacom, trying to better understand Redstone's business.
Paula is a cardiologist's daughter from Toms River, New Jersey, a middle child who attended
American University, in Washington, D.C., with no raging career ambitions. She worked for a
pharmaceutical company but hated it, then spent several years as a receptionist in New York's
Garment District. In her mid-20s she decided to pursue her one dream: to become a pastry chef.
She worked in restaurants in Philadelphia, London, Palm Beach, and New York for several years
before the long hours left her burned out. During a soul-searching talk, her mother, a nurse,
suggested she try teaching. Paula leapt at the idea, enrolled at New York University, and, her
certificate in hand, began teaching third-graders at P.S. 158, on Manhattan's Upper East Side.
For 13 years she loved the work, enjoying a circle of friends who often gathered in her one-
bedroom apartment, on East 72nd Street, but somehow she never found a partner in life. "I had a
relationship here and there, but, you know, I was just tired,'' she says. "I tried a couple of blind
dates, which were disasters. I was happy. I had a great job, great friends. I was fulfilled. When
Steven called [about the blind date], I just said, 'No, I'm too tired. Guys in New York are such
jerks. They don't pay, they want sex before you even get out of the car.' I remember I actually
asked, 'Can this joker even read?' I just said, 'No, I've got to stay home and grade papers.'''
Sweetwood, however, would not be denied. "Let me give you his name,'' he said. "Sumner
Redstone.''
"Wait,'' she said, "let me get a pencil.''
"You're kidding, right?'' Sweetwood said. "You don't know the name?''
"He's not a parent at the school, is he?'' she asked. "Because I don't date parents in the school.''
Sweetwood patiently explained that Redstone was chairman of a media conglomerate named
Viacom. This meant nothing to Paula. Sweetwood listed Viacom's assets: MTV Networks,
Paramount Picturesall of it. Paula listened, and finally, Sweetwood recalls, "she said, 'For one
date, sure.'''
Which is how Paula Fortunato, a person utterly oblivious to the ways of Wall Street and
Hollywood, arrived one night at a midtown Manhattan restaurant named Il Postino with only the
vaguest idea who her date really was. She was so pessimistic she stuffed extra cash into her purse
in case she needed money for a taxi home.
For his part, Redstone says he was intrigued by the idea of meeting a schoolteacher; he says it
was about his appreciation for educators, but one suspects the notion of dating someone
completely outside his orbit was equally appealing. He was nervous enough that he brought
along a Bear Stearns banker and his girlfriend. When Paula walked into the restaurant, "I did
take a look at her [and thought], Not bad,'' he recalls. "She talked about her life at school, making
$50,000 a year. I didn't know how she could live.'' He found her ignorance of his world
enchanting.
"I remember when I mentioned Barry Diller,'' Redstone says, "she asked, 'Is he Phyllis Diller's
husband?'''
"It's true,'' Paula says, "and, you know, I found him extremely charming. He looks you in the
eyes. He listened. He would touch my hand when he spoke. He was a true gentleman. He had so
many great stories. And he listened to me. He really did.'' The first inkling Paula had of her date's
prominence was the unusual attention their table was getting. Other diners glanced their way and
whispered. The food appeared within minutes, and the service seemed incredibly attentive. As
Paula recalls, "It didn't take me long to figure out he''she smiles at Redstone"was the one
bringing the attention.''
Redstone telephoned the next day. "I told you,'' Redstone says with a smile. "Patience is not a
virtue.''
He asked her to a party that evening. She said, "Not tonight.''
"Are you playing hard to get?'' Redstone asked.
No, she said. She had parent-teacher conferences that evening. Well, Redstone said, he would
pick her up afterward. Paula remembers changing into her cocktail dress in a classroom closet,
furiously brushing chalk dust off her hands. Earlier that day Redstone had messengered over a
packet of his press clippings. Not to brag, he says: "I was trying to let her know who I was.'' She
was less intimidated by his job than by the fabulous women at the party that night. "These
women were so buffed and polished and varnished,'' she remembers, "and I'm still dusting chalk
off my hands.''
In no time they were inseparable. Redstone was aghast at her tiny apartment, which he
nicknamed "Ratland.'' He was spending more and more time in Los Angeles, and he begged her
to come with him, but she insisted she wouldn't miss school days. So they developed a routine.
Every Friday around four o'clock Redstone would sit in his limousine two blocks from P.S. 158,
waiting for school to let out; not wanting to be thought a show-off, Paula wouldn't let him come
any closer. The limo whisked them to Teterboro Airport, in New Jersey, where Redstone's jet
was waiting. They were usually in Los Angeles in time for dinner at Dan Tana's or one of
Redstone's other favorite restaurants. At first they stayed at the Beverly Hills Hotel, then the
Hotel Bel-Air. Saturday afternoons Redstone exercised while Paula graded papers. Saturday
nights they attended parties, at the homes of such Hollywood old-guard couples as Marvin and
Barbara Davis and Michael and Shakira Caine. By Sunday afternoon they were back on the
plane, jetting east. "I never missed a day of school,'' Paula says with pride. "That was non-
negotiable.''
What was it like, she is asked, dating a billionaire? "It was never about the money,'' says Paula,
jaw set firmly. "He was just a great guy. He used to send me lilacs.''
"I'm ashamed,'' Redstone says. "I was like a schoolboy.'' Unfortunately, he was still a married
schoolboy. It took almost two years for Redstone to finalize his divorce, a period in which, Paula
admits, her family voiced doubts about his intentions. "They didn't really know whether to
believe his divorce story,'' she says.
"When we first all found out, how should I put this, we all thought like everyone else thinks: It's
a little odd,'' says Jim Geswelli, a businessman who is married to Paula's sister. "Sumner is so
much older. Then we met him, and, you know, Sumner, he's a very tough person to get to know,
as a friend. He's not an easy person to talk to. In the beginning, he didn't seem to talk about too
much. As time went by, though, we became great friends, surprisingly. And he and Paula, well,
there's a real spark there. You can see it.''
Today the Redstones are frequent guests at the Geswelli home, in tony New Vernon, New Jersey,
staying as long as 10 days during one recent Christmas visit. The Geswellis come to Beverly
Park whenever they can, although they have to brace themselves for Redstone's hours. "At four
o'clock in the morning, he gets on the intercom system and starts going, 'Coffee, coffee, coffee,'''
Geswelli says with a sigh. "Over time, you know, he gets louder and louder, and finally, by five,
someone goes down to have coffee with him. The day starts off very early there.''
No one involved can remember exactly how Redstone proposed. "I just remember one day he
brought home a whole bunch of rings, and I chose one,'' Paula says. "At first I didn't wear it in
public. I remember one night we were at Marvin and Barbara Davis's, though, and Sumner
couldn't stop smiling. We were sitting with Larry King, and Larry said something like 'What's
going on with you two?' And Sumner told me to go ahead and show him the ring.''
Once the divorce went throughRedstone paid an undisclosed sum rumored to be in the
hundreds of millions (his spokesperson denies this)he and Paula married at Temple Emanu-El,
on Fifth Avenue. Tony Bennett sang at the reception. From that point on, friends and associates
agree, Redstone was, if not a changed man, a happier man. "He's easier to deal with now,'' says
one Viacom executive. "She's made him easier just to be with. Now, sometimes he talks about
something besides business. Everyone at the company just loves her.'' "There's no question,
Paula brings out the better side of Sumner Redstone,'' Les Moonves told me. "Paula doesn't take
any guff from him. She'll say, 'Sumner, behave yourself.' I don't know if it's true, but I hear she
gives him demerits if he misbehaves. He's on a point system.''
Up, Above the World
Once he had a new wife, Redstone wanted a home. Just before their marriage, he told Paula he
wanted one in Southern California. They looked at several houses before Redstone pushed
through the back doors of this one, saw the view, and said, "We'll buy it.'' The house, which was
empty at the time, was actually owned by the next-door neighbor Sylvester Stallone. As
Redstone tells it, Stallone had bought it upon hearing that Suge Knight, the rap-music
impresario, was interested. Stallone was so happy at the prospect of having Viacom's C.E.O. next
door, Redstone boasts, that he sold it to him for $1.5 million below list.
Paula leads the tour, Redstone shuffling behind. At the end of the living room an entire wall has
been replaced with an enormous tank for Redstone's fish. Rounding the corner into the study, one
realizes that this is only one of four tanks in the room, each teeming with hundreds of
multicolored fish. There are two more in the corridor outside: "Overflow One'' and "Overflow
Two,'' Paula calls them. Redstone actually had tiny cameras inserted into the two tanks so that he
could watch them on the study's television.
"It's so calming,'' Paula muses. "It's mesmerizing.''
"I feel attached to them,'' Redstone volunteers. "If a fish dies, it really affects me.''
The study, or "the fish room,'' as Redstone calls it, is the center of his daily routine. After rising
at four, he throws on a robe, plops down in a soft chair in the study, switches on CNBC, and
begins making his morning calls; there's a tray beside his chair with a bottle of pills on top. His
first calls usually go to Les Moonves or the executive who replaced Tom Freston at Viacom,
Philippe Dauman. At 6:309:30 eastern timethe New York Stock Exchange opens, and
Redstone spends the rest of the morning on the phone with Sweetwood at Bear Stearns, quietly
orchestrating purchases of Viacom stock; this kind of "repurchase'' program is a popular way to
boost the price of a company's shares. At one o'clock, just before the market closes in New York,
he finally puts the phone down and goes to exercise.
Paula shows us the way. Past the screening room, the walls of the home's main hallway are lined
with a number of drawings, many by Paula. "See that one?'' she says as we stop in front of a folk-
artish rendering of Sumner and her on the shore of a lake. Water appears beneath Redstone's feet.
"Sumner really likes this one,'' Paula says, her voice lowering to a mock whisper. "Because it
looks like he's walking on water.'' The drawing was a gift from Tom and Kathy Freston. "I hope
we stay friends with Tom and Kathy,'' she says.
"I do, too,'' Redstone says.
On the far side of the house is the exercise area, an indoor pool flanked by a room containing
Redstone's treadmill. Every day he spends 20 minutes on it, then 35 on a stationary bike, then 8
minutes or so in the pool. His houseman, Carlos, stands by with a telephone as he swims. "The
whole time I'm panting,'' Redstone interjects, "which is good, because I want to live.'' He also
plays tennis with investor Kirk Kerkorian and Alex Olmedo, the pro at the Beverly Hills Hotel.
Outside, Paula leads the way through a small backyard of thick grass, past the pool, and down to
the Jacuzzi, with its can of Gillette. The slope beside it was covered with ferns until the day
Redstone thought he saw something move and a gardener fished out a six-foot rattlesnake. Now
it's a cactus garden. As we cross to the far side of the yard, past the tennis court, Paula leads me
through her fruit garden. As she plucks a ripe fig and thrusts it into my hand, I blurt out,
awkwardly, whether it will bother her that she won't be having Redstone's children.
"Well,'' she says, not missing a beat, "I look at it like this. I've had 40 children for 13 years. Now
our dogs are our children.'' She takes a deep breath. "I have it all here,'' she says. "I love my
house. I love my husband. I love everything about it.''
Redstone's afternoon ends after his shave, when he slips back into his robe"so I'm not sitting in
the nude, you know''and returns to the fish room for more phone calls. Most nights he and
Paula dine early with friends, producer Mike Medavoy and his wife Irena; producer Leonard
Goldberg and his wife, Wendy; and former Disney head Michael Eisner and his wife, Jane.
Bedtime is on the early side. "I would like to go to bed earlier, but Paula won't go to sleep until
10,'' Redstone says.
"No, this is the way it is,'' Paula says. "He wants 9, I want 11, so we settle at 10.''
After the tour, Redstone sits down at an outside table, laboriously inscribes a message for me in
his 2001 autobiography, A Passion to Win, and smiles. Here with Paula in Beverly Park, he is a
very happy man.
I know what people think,'' Redstone is saying, glancing around the house, "but there was no
way I was going to fade into the distance and live a life of luxury in Beverly Hills.''
To hear Redstone tell it, his seclusion here in Beverly Park changed little about the way he runs
CBS and Viacom, just where he runs them. He's not having a comeback, he growls; he feels he
never went away.
He is especially irked at his slide in the Vanity Fair New Establishment ranking, mentioning the
matter four separate times; he even had his P.R. man, Carl Folta, call the magazine to complain.
"The fact is, nothing really important can happen at either [Viacom or CBS] without me clearing
it,'' Redstone says. "That, of course, was the story with Tom Cruise, and with Tom Freston. I
guess that caused Vanity Fair to wake up to the idea that I wasn't really stepping away from
business.''
The sequence of events that led to the uproar in Redstone's world today began with the
resignation of Mel Karmazin, then the president and chief operating officer of Viacom and
Redstone's heir apparent, in 2004. Suddenly, Redstone was faced with the decision of who would
replace Karmazin, and thus who in all likelihood would eventually run the united companies
when Redstone retired; Redstone had already made up his mind to step down as C.E.O. in three
years. The two candidates were obvious: Les Moonves, the hard-charging chairman and C.E.O.
of CBS, and Freston, the genial head of MTV Networks, a man who had worked for Redstone
since 1986. Redstone chose Frestonand that's where, in retrospect, Redstone says the problem
began.
Then, as now, MTV was Viacom's crown jewel, accounting for 70 percent of its 2005 revenues
and almost all its profit. Tall and craggily handsome, with spiky salt-and-pepper hair, Freston
had been on board since its founding, moving up through the ranks to become MTV's C.E.O. in
1987. Shuttling between Los Angeles and New York, he was universally liked on both coasts
and inspired genuine loyalty in the ranks. A prominent Democratic fund-raiser who runs in a
circle of friends that includes Jimmy Buffett, John Mellencamp, Rolling Stone's Jann Wenner,
producer Brian Grazer, William Morris head Jim Wiatt, and Yahoo C.E.O. Terry Semel (as well
as the editor of this magazine), Freston is married to an author of relationship-advice books, the
former Kathy Law. In New York, they live in the Upper East Side town house that once
belonged to Andy Warhol; they also have houses in Beverly Hills and Montecito. "Tom,'' says
one longtime friend, a former studio head, "is a guy who went through life trying to do some
good and make some friendsfor Viacom, I mean. I have never in my entire life met a single
person who didn't like the guy.'' (Freston, who left for a prolonged Asian vacation following his
dismissal, declined comment for this story.)
"No, I'll Not Weep" (King Lear, Act II, Scene IV)
One evening following Karmazin's announcement, Redstone summoned Freston to his suite at
the Carlyle and offered him the job as Viacom's new presidentand Redstone's heir apparent.
"This was historic,'' Redstone remembers, a final passing of the torch, a final resolution of the
succession issue that had preoccupied Wall Street analysts and journalists for years. "But,''
Redstone goes on, "when I offered the job to Tom that night, he said, 'Sumner, I'm not
comfortable being C.E.O. of Viacom. I'd rather just be C.E.O. of MTV Networks.''' Redstone
was flummoxed, but accepted Freston's wishes. "That's really when my doubts about Tom
began,'' he adds.
The moment Freston left the suite, Redstone called Moonves and ordered him to the Carlyle.
"That same evening, I offered the job to Les,'' he remembers. "And knowing Lesbang!he
takes it so fast.'' They shook hands on it. It would be announced the next day: Les Moonves, not
Tom Freston, was to be Sumner Redstone's successor.
Then, the very next morning, Freston contacted Redstone and said he'd had a change of heart. He
would accept the job after all. "I guess he talked it over with Kathy, but I was really in a spot,''
Redstone says. "I was in a very difficult position. Tom said no, then yes. I had to do something.
So, to make everyone happy, I had to split the company.'' Redstone chuckles when asked about
Moonves's reaction to the news. "Let me tell you,'' he says, "Les wasn't too happy.''
Redstone divided Viacom into two spheres, CBS and its related businesses for Moonves, with
MTV, Paramount, and everything else going to Freston. The split worked so well that the
following June, faced with the continuing deterioration of Viacom's stock price, Redstone
proposed making it formal, dividing CBS and Viacom into separate companies. In one bold
stroke, Moonves and Freston became C.E.O.'s of publicly held companies, something neither
man had done before. Few had doubts that Moonves could adapt, but from the beginning there
were concerns whether Freston, an inside man all his career, would warm to a C.E.O.'s crucial
job, the promotion of his stock to Wall Street.
"Frankly, I thought Tom was over his head as a public-company C.E.O.,'' says one investment
banker who knows him. "Half his time as a C.E.O. has to be dealing with Wall Street and crap
like that. That wasn't what Tom was good at. He's an operating guy.''
Redstone heard the doubters, but was willing to see how Freston adapted to his new role, which
he formally assumed when the split became official last January. If Viacom's stock price is any
indication, Wall Street was underwhelmed; thanks in large part to Freston's inability to make any
kind of splash in the online world, the stock fell 20 percent in his eight months at the helm.
Redstone characterizes this as startling; after all, analysts had forecast CBS stock to be the
tortoise, Viacom the hare. "The stock was down 20 percent! And they were supposed to be the
hot stock!'' Redstone barks, even though in the next breath he admits his own culpability. "I
questioned whether it would work out [with Tom]. Tom himself said he wasn't comfortable
dealing with Wall Street.'' He sighs. "As good as Tom was running MTV, he was not the best
person to run Viacom.''
The biggest knock against Freston, at least in Redstone's mind, was his failure to buy MySpace,
the red-hot Internet site where millions of American teenagers create their own home pages and
furiously network. After his dismissal, the newspapers were full of unattributed criticism aimed
at Freston for dallying with MySpace for months until Rupert Murdoch's News Corp. swept in
and bought its parent company out from under his nose for $580 million. One question to
Redstone makes it clear who was behind those blind quotes. "We lost that deal because Tom was
too slow,'' he says. "That was the problem with Tom. This distinguished him from the way Les
would've done that deal, or the way I would have.''
The Internet represents the future of businesses involved in intellectual property, and as such is a
sore spot for Redstone. Viacom's online efforts to date have been patchy and undistinguished, a
string of minor acquisitions and, most notably, a new MTV Web site called Overdrive that has
floppedloudly. Which, in retrospect, has made Viacom's inability to buy MySpace all the more
painful. The irony is that Freston's MTV was the first suitor to begin sniffing around MySpace,
in late 2004. Within weeks, Viacom executives were meeting with MySpace executives in
earnest.
While this was necessary to understand its business, in hindsight Freston made a miscalculation.
His approach to MySpace all but ignored the fact that MySpace was already controlled by an
Internet company called Intermix, which specializes in spyware and other e-commerce
techniques, and that Intermix had an option for the 47 percent of MySpace stock that was still
owned by minority partners. MySpace, in effect, was not in control of its own destiny. "You
didn't know who was totally in charge there,'' acknowledges a Viacom executive involved in the
talks. Then, in the middle of negotiations that spring, the New York attorney general, Eliot
Spitzer, sued Intermix for fraud. A Viacom attorney who reported directly to Redstone decreed a
halt to the negotiations. "The decision was we had to wait till the Spitzer decision came in,'' says
the Viacom executive. "So the deal just sat there for months and months.'' Freston, this executive
asserts, was powerless to proceed. Freston's allies inside Viacom, meanwhile, portray Redstone
as far less interested in MySpace than Freston himself was.
Intermix, however, was not inactive during this period. When its executives caught wind of
Viacom's interest, they brought in Montgomery & Co., an investment-banking boutique that
specializes in new media, and a team of lawyers to consider the sale of Intermix itself, along with
its MySpace option. "Clearly, as Viacom got interested, we wanted another offer on the table, so
we brought in Fox,'' says a person on the Intermix team. "Only after that did we plan to go see
Viacom. No one thought Viacom would make a deal first. We were laughing because we'd done
a lot of deals with Viacom. We knew they'd just send 20 people and have meetings after
meetings and never get anywhere.'' The Intermix adviser, for his part, says Redstone's criticism
of Freston is on the mark. "That's just how Viacom was at the time,'' he says.
Once the Spitzer lawsuit was nearing settlement, in the summer of 2005, Murdoch bid $580
million for Intermix. Montgomery and the lawyers invited Viacom to top it. "Viacom's answer
was 'We're not sure we can get to that valuewe'll get back to you next week,''' says the
Intermix adviser. "But Fox wanted to do the deal that same weekend, so we did.'' The Viacom
executive disputes this, saying he believed Viacom still had until Monday morning to bid. A
meeting of Viacom's board was held, at which Freston and two board members, Redstone's
daughter, Shari, and Ace Greenberg, chairman of the executive committee of Bear Stearns, urged
Redstone to counterbid.
"I remember Ace said, 'Don't be afraid to go for it,''' says a person who attended the board
meeting. "But Sumner and Philippe Dauman said it was irrational, that Rupert was irrational, that
he would pay anything, that they would end up [paying more than] $800 million.''
Redstone was incensed. His anger only grew after Murdoch, upon completing the MySpace deal,
won back the purchase price and more by selling the right to advertise on MySpace to Google for
a stunning $900 million. In Redstone's mind, it was bad enough that Freston had let the world's
hottest Internet property get away, but losing it to Murdoch was just too much. "No! Not him!''
Redstone bellows, wagging a finger in my face. "I don't want to lose to him. Just like he wouldn't
want to lose to me. It was a humiliating experience. I know Murdoch well. There's no chance
of outbidding him! I wanted MySpace before that, before Murdoch got interested. It sat there for
weeks while Tom, in his methodical way, was studying it, having committee meetings, doing due
diligence. It went on and on and on! Tom let it get away! Les would've grabbed it! So would I!
And so we lost it.''
Afterward, Redstone says, Freston "came over here and sort of apologized, said why he didn't get
it. He didn't talk about the period before the Fox offer, and I didn't remind him. I said, 'Look,
Tom, you made a mistake. We all do. I'm sure it won't happen again.'''
This summer, 12 months after the MySpace debacle, and faced with the continuing fall of
Viacom's stock, Redstone asked his board to consider whether Freston was the best man for the
job. He already had a replacement in mind, his longtime associate Philippe Dauman; Dauman,
following a stretch in top positions at Viacom in the mid-1990s, had left to start a small
investment-banking company, but remained on Viacom's board. "I gave them all of Tom's
strengths and weaknesses, and all of Philippe's,'' Redstone insists. "The decision was up to the
board.''
While Freston's fate hung in the balance in August, Redstone found himself thrust into a crisis he
insists he never expected:
The firing of Tom Cruise, arguably the biggest movie star in the world.
Cruise Control
As Redstone tells it, he wasn't the first person in his own household to look askance at the string
of Cruisian antics over the last year: the manic hopping on Oprah's couch, the Today-show
attacks on Brooke Shields for taking antidepressants, and his Katie Holmes thing. It was his wife,
Redstone says, who turned on Cruise first, a contention Paula Redstone declines to elaborate on
even as her husband makes it. "Paula, like women everywhere, had come to hate him,'' Redstone
declares. "The truth of the matter is, I did listen to her, but I make business decisions myself.''
And in terms of business, Redstone claims he felt Cruise was actually costing Paramount money.
Cruise's production company, which the actor operates along with producing partner Paula
Wagner, was paid $10 million a year to create movies for Paramount, and until this year had a
sterling track record, led by the first two Mission: Impossible movies, which grossed around
$500 million each worldwide. (Overall, Cruise's films with Paramount have grossed $3 billion
worldwide at the box office.) It's the performance of Mission: Impossible III, however, that
Redstone seized upon as he and his wife soured on Cruise's public utterances. The movie did
excellent business, earning just under $400 million worldwide, but Redstone felt the actor's
extracurricular behavior prevented it from making more. A Cruise spokesperson declined all
comment.
"When did I decide [to fire him]?'' Redstone asks. "I don't know. When he was on the Today
show? When he was jumping on a couch at Oprah? He changed his handler, you know, to his
sisternot a good idea. His behavior was entirely unacceptable to [my wife,] Paula, and to the
rest of the world. He didn't just turn one [woman] off. He turned off all women, and a lot of
men. He was embarrassing the studio. And he was costing us a lot of money. We felt he cost
us $100, $150 million on Mission: Impossible III. It was the best picture of the three, and it did
the worst.''
The deal with Cruise/Wagner Productions was scheduled to lapse at the end of August. Redstone
indicates he decided to cut ties to the company sometime last spring, waiting until the July time
frame to notify Freston and Paramount's C.E.O., Brad Grey. "I made my decision without their
support; I didn't tell anyone for months,'' Redstone says. "But [eventually] I made my position
clear to Tom and Brad, that he should be off the lot. They had some concerns.'' In fact, Freston
and Grey realized that "firing'' an actor with Cruise's visibility and track record, a highly unusual
if not unprecedented move, would trigger a severe backlash in Hollywood's creative community.
Still, it was Redstone's company, and they were his employees.
"This wasn't just Sumnerhe had a right to feel the way he did,'' says a person involved in
Paramount's deliberations. "I mean, women didn't go see the movie, because of Tom Cruise's
behavior. It showed up in the research.'' Freston and Grey, this person says, had put a lowball bid
on the table to renew the contract$2.5 million, by all accountsand everyone involved
realized that both sides would probably allow the deal to quietly lapse. "The negotiations had
started when Sumner weighed in,'' this person says. "Brad had to get rid of the offer, which is a
hard thing to do. They were working toward that. They understood where Sumner was coming
from. They really did. They were trying to pull [the offer] back, and when they were trying to do
that, Sumner went public. That's when everything hit the fan.''
Redstone characterizes his decision to "go public'' as entirely an accident. A savvy Wall Street
Journal reporter, Merissa Marr, caught wind of the story and telephoned Redstone at his home,
and Redstone told her everything, castigating Cruise for his behavior. Redstone acknowledges
his comments were unnecessary, but he brushes aside any suggestion he went public merely to
re-assert his role as Viacom's alpha dog. Still, there's no denying the sparkle in his eyes as he
recounts the reaction to his comments. Clearly, he loved every minute of it.
"I wasn't looking for an explosion,'' Redstone insists, "but I didn't mind it. The explosion was
good. It sent a message to the rest of the world that the time of the big star getting all this money
is over. And it is! I would like to think that what I did, or what we did, has had a salutary effect
on the rest of the industry.''
The problem, though, was that Redstone's comments severely undercut Freston's and Grey's
authority. "Tom was very upset and registered it with Sumner," says a close Freston ally. "That
was probably not a good thing. What bothered him was that Brad should've been handling this.
This was not for Sumner to reach down into the company and do this, because it was
demoralizing for Paramount, and demoralizing for Viacom. This was something Tom felt Brad
was handling." Freston was also irked at a quote Redstone gave the Los Angeles Times, to the
effect that firing Cruise was difficult for Freston because "he's in the talent business." Says a
longtime Freston friend, "When I saw that, I thought, Wait a minute. That was a personal shot at
Tom Freston that was unnecessary. Freston was upset. I know he was. But I don't think he
thought he was going to get fired. That came as a complete surprise.''
Endgame
It took six weeks for Viacom's board of directors to decide Freston's fate, a period in which
Freston himself had no inkling he stood on the precipice. Late on the Monday afternoon of Labor
Day, he had just finished a game of tennis with Terry Semel at legendary studio head Bob
Evans's Beverly Hills estate when he found several insistent messages from Redstone on his cell
phone. He drove home before calling Redstone back, both because he wanted to listen to the new
Bob Dylan CD, Modern Times, and because he preferred to talk to Redstone from his home
office. When the two finally spoke, Redstone summoned Freston to Beverly Park. Friends say
Freston had no reason for concern; he often visited Redstone at his home, and while he disagreed
with the way Redstone had handled the Cruise matter, there had been no suggestion that his job
was in jeopardy.
Redstone was waiting in the living room; Paula had asked "to disappear, for obvious reasons,''
Redstone says. He goes on: "I talked to Tom right where you're sitting now. I said to him the
same things I've said to you, that mistakes had been made, that it was time to make a change. It
was then that I reminded him that he himself had expressed doubts about being C.E.O., and
these were his exact wordshe said, 'But, Sumner, I thought I was growing into it.' And I
thought this was a clear indication he knew he was not there yet.''
"Tom was totally blindsided," says a Freston friend. "The whole thing was over in 20 minutes.
This was how Sumner treated a man who had worked for him 20 years."
Freston's firing was deeply unpopular at Viacom, especially at MTV, and news of it was greeted
with disbelief all across Hollywood. Two months later, things are finally beginning to calm
down. Freston walked away with a compensation package worth $72 million, plus $10 million in
stock and options. At the time I saw Redstone, in late September, Viacom stock was up 11
percent. Redstone and Dauman, meanwhile, have spent long hours holding the hands of Freston's
many friends and supporters who remained behind, including MTV's C.E.O., Judy McGrath, and
they have so far been successful at heading off any mass exodus. Redstone has repeatedly
emphasized that Freston's most visible hire, successful, driven Paramount head Brad Grey, is
safe in his job. Of course, he said the same thing about Freston barely six weeks before dumping
him.
The real question is Redstone's future. "He'll tell you he's never going to die,'' says one studio
chief. "What does that mean? Only a guy who is afraid of dying says he's never going to die.
Clearly, he's afraid to die. I think that's why he always feels so threatened by people like
Freston.'' Adds Sue Mengers, "Sumner does not want to let go of that ledge.'' Redstone's
daughter, Shari, director of National Amusements, remains his heir apparent, but already there
are rumblings of a squabble among those in Redstone's circle who favor Dauman instead. When
I asked Redstone about this, there was a pause.

"Now you're putting me on the spot,'' he begins. "Originally, in my will '' When Paula shoots
him a look, Redstone abruptly changes tack. "It will depend on the board,'' he says. When it's
pointed out that this is a non-answer, Redstone says, "I'll be dead. There's no way I leave this job
before I die.'' Pressed further, Redstone says Shari's future "is subject to two points. That she
would want to [succeed me]. And the boards of both companies would have to approve her.''
Through a spokesman, Shari Redstone declined comment.
The question of succession is forgotten until the interview ends, when Redstone rises for the first
time in two solid hours. Suddenly he stumbles, his knees buckle, he pitches to his right and
begins to fall. He catches himself on a chair just as Paula lunges to his side, wrapping her arms
around his torso and helping him stand. Just as she lets go, though, he begins to fall again. This
time she eases him back into his chair.
"I'm fine, I'm fine,'' Redstone mutters.
"I should've put his feet up,'' Paula says. I'm too embarrassed to ask whether this is an ongoing
problem. After a bit, Redstone rises and follows us through the house. He is a billionaire, a man
who dictates the collective fate of thousands of lives, but as he stands there waving good-bye, his
eyes no longer as steady as they were an hour before, one is reminded there are some things in
life even a mogul can't control.
Bryan Burrough is a Vanity Fair special correspondent.