Weinstein Company Sale Delayed by N.Y. Attorney General Lawsuit

The fire sale of the Weinstein Company hit a last-minute snag on Sunday, when Eric T. Schneiderman, New York’s attorney general, filed a lawsuit against the studio and its fraternal founders alleging that they repeatedly violated state and city laws barring gender discrimination, sexual harassment, sexual abuse and coercion.

The lawsuit, filed electronically in State Supreme Court in Manhattan, appeared timed to at least temporarily stop a sale, which had been expected to be finalized on Sunday.

“Any sale of the Weinstein Company must ensure that victims will be compensated, employees will be protected going forward, and that neither perpetrators nor enablers will be unjustly enriched,” Mr. Schneiderman said in a news release.

The Weinstein Company, which has been trying to avoid bankruptcy since October, when reports by the The New York Times and The New Yorker revealed decades of sexual harassment allegations against one of its founders, Harvey Weinstein, was nearing a deal to sell itself to an investor group for roughly $275 million, plus the assumption of $225 million in debt, according to two people briefed on the deal who spoke on condition of anonymity because the negotiations are private. The impending deal also called for the creation of a multimillion-dollar settlement fund for women who have accused Mr. Weinstein of abuse.

Under the deal, the two people said, Mr. Weinstein’s younger brother, Bob Weinstein, who has run the studio’s commercially oriented Dimension Films label, would leave the studio. Bob Weinstein had frantically tried to keep control of the company following his brother’s firing in October.

The brothers, who jointly own about 42 percent of the Weinstein Company, would receive no cash from the proposed sale, according to the two people briefed on the deal. Other equity holders, including the advertising giant WPP Group, may also be wiped out.

But the final-stage talks came to a screeching halt on Sunday afternoon, according to the two people briefed on the process, as they received word that Mr. Schneiderman was about to file a lawsuit based on an ongoing four-month investigation into the Weinstein Company’s internal dealings.

The lawsuit, which refers to Harvey Weinstein by his initials, says that the company’s management and board of directors “were repeatedly presented with credible evidence of HW’s sexual harassment” of company employees and interns “and his use of corporate employees and resources to facilitate sexual activity with third parties.”

And the lawsuit says that, by guaranteeing the silence of victims and other employees through nondisclosure agreements, the company enabled Mr. Weinstein’s “unlawful conduct to continue far beyond the date when, through reasonable diligence, it should have been stopped.”

The court filing mentions the possible sale of the company, saying that it could leave victims “without adequate redress” and could provide financial benefits to Mr. Weinstein or his enablers.

The Weinstein Company has been in exclusive sale negotiations since Jan. 23 with an investor group led by Maria Contreras-Sweet, who is best known for running the Small Business Administration under President Barack Obama. Although she has no Hollywood experience, Ms. Contreras-Sweet pulled ahead of bidders like Lions Gate Entertainment by promising to keep the studio intact and retaining its employees, including senior managers like David Glasser, the Weinsteins’ longtime top lieutenant. (In the past, the Weinsteins called him their “third brother.”)

A spokesman for Ms. Contreras-Sweet declined to comment. The Weinstein Company did not immediately respond to a request for comment. Mr. Weinstein has denied all allegations of “non-consensual sex.”

Content originally published on https://www.nytimes.com/2018/02/11/business/media/harvey-weinstein-company-sale.html by BROOKS BARNES and WILLIAM NEUMAN