Now it's getting personal in Round Two of the legal war between Howard Stern and his satellite radio boss Mel Karmazin according to affidavits filed today by Stern and his longtime agent Don Buchwald, reviewed exclusively by me. Only last January, both Stern and Sirius CEO Mel Karmazin were basking in the glow of Stern’s new contract, with Howard praising how well he’d been treated. But it turns out that, even as Stern was inking the new 5-year pact, the two men were already clashing over Karmazin’s refusal to acknowledge that the company owed Stern additional performance-based stock awards because he exceeded the subscriber targets set in his original agreement with Sirius. Three months later, Stern and Buchwald sued the merged Sirius XM. Now new details keep surfacing about what went wrong between Stern and Karmazin.In the affidavits, Buckwald reveals that in early 2010, he contacted Sirius about why the performance-based compensation that Sirius then owed Stern for 2008 and 2009 wasn't paid. “Sirius claimed that no compensation was due,” writes Buchwald. He then had Stern’s lawyer write to Sirius’s General Counsel asking for an explanation. The company again refused to pay. “Sirius’s lawyer claimed that the subscribers on the XM platform did not count toward the total number of Sirius subscribers and pointed out that we had already received the 'merger bonus',” writes Buchwald. Finally, during the renegotiation of Stern’s original contract, Buchwald tried again. “I attempted to discuss the performance-based stock awards with Karmazin,” writes Buchwald. “Karmazin, however, refused to discuss any resolution of the matter.”
Buckwald alleges that only when it became clear they weren't going to “make any progress with Karmazin,” he and Stern decided to bring a lawsuit because Sirius was now trying to renege on the agreement. Buchwald points an accusatory finger at Karmazin in the affidavit. “Sirius’s CEO, Mel Karmazin, was not at Sirius when I negotiated the Agreement with the company. The CEO at the time was Joseph Clayton. Scott Greenstein has told me a number of times that Karmazin is unhappy with the size of the Agreement that was negotiated and agreed to by his predecessor, and that Karmazin has said that if he had been CEO at the time, he would have given Stern much less and not given into our demands. He might have tried to do that, but in this case, as I told Scott Greenstein more than once, Sirius would not have gotten Stern.”
Stern for his part, seems to be taking the lawsuit very personally. “Our Agreement is clear — the stock awards are based upon the total number of subscribers that the company has at the end of any given year,” Howard says in his affidavit. “When we were negotiating the agreement, Don raised with Sirius the possibility that Sirius and XM might combine. Sirius never said that, if that happened, it would not count the new subscribers for purposes of the stock awards.” Stern adds that he fulfilled his role of drastically increasing the subscriber numbers and now deserves to share in the company’s success.
Stern doesn’t specifically single out Karmazin as a target, but it’s clear that his patience is wearing thin. “Last year, Sirius celebrated having more than 20 million subscribers [by] taking out ads in the media and throwing a Paul McCartney concert to commemorate this historic event. I went to that concert, and it was simulcast on one of my channels,” he notes rather pointedly in the final paragraph of his affidavit. “I do not understand how the company can brag to the world that it has more than 20 million subscribers, and then turn around and tell me that only half of them count. All of these subscribers are subscribers of Sirius. Sirius has pointed to them as a measure of the company’s success, and the whole purpose of the performance-based stock awards was to allow me to share in that success.”
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