The following article comes from Tom Taylor’s newsletter, Taylor on Radio-Info.
Stern sues Sirius XM for breach of contract – unpaid stock awards.
The highest-paid radio personality in history – by far – takes his employer to court for allegedly failing to comply with the terms of his just-expired first five-year contract, worth $500 million. Here’s the kernel of the lawsuit filed in New York State Supreme Court – “When Sirius needed Stem, it promised him a share in any success that the company achieved. But now that Sirius has conquered its chief competitor and acquired more than 20 million subscribers, it has reneged on its commitment to Stem, unilaterally deciding that it has paid him enough.” Sirius XM – and Mel Karmazin – must feel pole-axed. The company’s Senior VP of Communications Patrick Reilly tells TRI the company “just signed a contract through 2015 with Howard Stern, and he is a valued part of our company. We were thus surprised and disappointed by the subsequent legal action initiated by his production company and agent. We have met all of our obligations under the terms of our 2004 agreement with Howard, his agent and production company.” Ah – the “agent” probably has a lot to do with this. That’s Don Buchwald, Stern’s forever-agent and a partner in his One Twelve Inc. production company. He’s a tough-as-nails negotiator and Buchwald may be one of the prime drivers here. Part of the suit alleges that he wasn’t getting paid under his consulting agreement. So what’s the beef?
Howard Stern says he propelled the growth of satellite radio and deserves the spoils.
The suit alleges that in the later years of Stern’s original deal that began in January 2006, Sirius “failed to pay One Twelve” or Stern’s agent Don Buchwald “the performance-based compensation due and owing to them.” Howard’s line is that he helped Sirius grow faster than its own internal estimates – which were already pegged very high. So in addition to the tens of millions in cash paid to Stern, he and Buchwald believe they should’ve gotten lots more stock. Everybody agrees that Stern and Buchwald together got 34.4 million shares of stock when Howard showed up for work in 2006. Sirius (according to the Wall Street Journal) says it awarded Stern another $84 million worth of stock a year later. But Stern alleges that was the last of the stock. The Journal says Howard and Don didn’t push the matter “while Sirius was struggling or repeatedly on the verge of bankruptcy.” But CEO Mel Karmazin managed to pull off the merger with rival XM, and the combined company ended 2010 with more than 20 million subscribers. The suit alleges that when somebody from One Twelve asked about the more recent stock payments, Sirius XM said the company wasn’t required to make them. Then it was – “See you in court.”
Tom Taylor is the Executive News Editor at Radio-Info.com.
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