NEW YORK (AP) – A New York judge has ruled that shareholders of Viacom Inc. may go ahead with a lawsuit claiming the communications giant’s top three executives were overpaid in 2004 while the company lost almost $17.5 billion.

State Supreme Court Justice Charles E. Ramos found that the shareholders presented sufficient facts to support their claim that the board violated its fiduciary duty by paying the trio a total of nearly $160 million in 2004.

The executives are named as defendants in the case along with the 12 members of the board of directors. The three are Sumner Redstone, Viacom’s chairman and chief executive officer, and Thomas Freston and Leslie Moonves, who served as co-presidents and co-chief operating officers at the time. A Viacom spokeswoman declined to comment.

The judge also found that the shareholders offered adequate facts to support an unjust enrichment claim against the executives. He said the plaintiffs claimed that the board approved a 2004 pay package that helped cause the “unjust impoverishment” of Viacom while the company was suffering financial losses. Ramos’ ruling denied a motion by Viacom’s board of directors to throw the case out.

“Plaintiffs claim that Redstone dominated the Viacom compensation scheme in that no checks existed to monitor the awarding of excessive compensation to Redstone, Freston and Moonves,” Ramos wrote in his decision. The entire Viacom Board unanimously approved the compensation package, he wrote. Ramos, noting that Redstone got about $56 million while Moonves and Freston got about $52 million each in overall compensation, agreed with the shareholders’ contention that the compensation packages were due to a lack of independence among board members.

Redstone is the controlling shareholder of Viacom. The company conceded that five of its members were not independent but contended that a majority, seven of the 12 directors, were independent.

The judge said that for the lawsuit to proceed, the plaintiffs had to show at least one of the directors was not independent of the executives.

Ramos said they had presented sufficient evidence to question the independence of one of the seven, Alan “Ace” Greenberg, former chairman of Bear Stearns Co. Ramos said Bear Stearns had advised Viacom on a number of major transactions.

“The fact that Greenberg advised Redstone in his personal affairs in two large acquisitions, provided services and continues to provide services to Viacom is sufficient to create a reasonable doubt as to his ability to evaluate plaintiffs’ demand without a taint of interest, ‘extraneous considerations’ or influences,” Ramos wrote.

The New York-based Viacom split into two companies at the beginning of this year, a “new” Viacom Inc. and CBS Corp.

AP-ES-06-30-06 1806EDT

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