UPDATED: A deal to buy the troubled Weinstein Co. is in serious doubt as the New York attorney general has filed a civil rights lawsuit against the company.
An investor group led by Maria Contreras-Sweet has been in talks to buy the company for $500 million, including $225 million in assumed debt. The two sides have been huddled for days trying to complete the transaction with the hope of announcing it on Sunday or Monday.
But now Contreras-Sweet’s group has halted all work on the deal after New York Attorney General Eric Schneiderman’s office threw an eleventh-hour wrench into the process by raising concerns about David Glasser, the longtime Weinstein Co. executive slated to become CEO under the new investor group.
Glasser was a right-hand man to Harvey Weinstein, and the attorney general’s office has come to believe that he failed to protect employees from Weinstein’s sexual misconduct. The office has also raised concerns with the new ownership group about whether a proposed victims’ fund would provide adequate compensation. Sources close to the deal said the fund would be as much as $50 million or more, but the A.G.’s office worried that there was no “fund” beyond the Weinstein Co.’s insurance coverage.
The attorney general’s office filed a lawsuit Sunday afternoon, alleging that the company facilitated Weinstein’s abuses and seeking strict oversight of the company’s employment practices. The investor group, backed by billionaire Ron Burkle, is said to have balked at the attorney general’s oversight proposals. Given that the talks were so far along, Contreras-Sweet is described as “stunned” at the prospect of the attorney general putting up hurdles to implementing her vision of a largely female-led studio, out of the ashes of a company that has become synonymous with Hollywood’s culture of abuse and silencing victims.
The attorney general’s office first contacted Contreras-Sweet last week, but the Weinstein Co. board initially prevented her from returning the call due to a non-disclosure agreement, a source said. When Contreras-Sweet and her representatives finally got in touch with Schneiderman’s office over the weekend, and learned of the potential conditions, she became reluctant to move forward.
The Contreras-Sweet group is also frustrated that they were unable to engage with Schneiderman’s office until this weekend. Sources close to the situation say Contreras-Sweet has yet to meet directly with prosecutors and there is no clarity on what the next steps are for both sides.
A spokeswoman for Schneiderman’s office said they were “surprised” that Contreras-Sweet’s group rebuffed the offer to negotiate.
“We expressed to them how important it is that any deal adequately compensate victims, protect employees, and not reward those who enabled or perpetuated this egregious sexual misconduct,” said spokeswoman Amy Spitalnick. “We were surprised to learn they were not serious about discussing any of those issues or even sharing the most basic information about how they planned to address them.”
According to a document reviewed by Variety, Schneiderman’s office sought extensive oversight over management hires and employment policies at the new company. The office was especially keen to have supervision over the company’s sexual harassment policies, including provisions to ensure that complaints remain anonymous and do not result in retaliation. The office also wanted the company to release current and former employees from their non-disclosure agreements to facilitate further investigation.
The attorney general’s proposals were presented as being open to negotiation. The Contreras-Sweet camp was regrouping on Sunday and hoping to find a path forward with Schneiderman in the coming days.
According to a source, the decision to retain Glasser as CEO and maintain other senior managers was made in the interest of ensuring that the studio would be able function during the transition period after a sale, while the board sorted out the company’s long-term fate. In that context, Glasser’s position may well become a negotiating point for the group with the attorney general.
Glasser, however, was identified as a “key” person in the new company’s senior management. And his support may well have influenced the Weinstein Co. board to select the Contreras-Sweet group instead of three rival bidders. Cutting him loose, in that case, may be harder than it appears.
Sources close to Contreras-Sweet also state that her bid includes money set aside for restitution to Harvey Weinstein’s alleged victims, in addition to preserving the company’s insurance policies that will also cover some liability. A bankruptcy process, which is inevitable for Weinstein Co. if a sale cannot be orchestrated soon, would make it harder for victims to receive compensation from the company.
There is a dispute, however, as to whether the “victims’ fund” actually goes beyond the insurance policies. Given the allegations that the Weinstein Co. was aware of Harvey Weinstein’s abuses and failed to stop them, it’s also quite possible that insurers would balk at paying out claims.
The sale does not require Schneiderman’s approval, but the attorney general’s lawsuit makes it a much more complicated undertaking. Schneiderman’s office appears unconvinced that the Burkle group’s promises to revamp the company amount to anything more than window-dressing. The office asked for an independent monitor that would have authority to probe the company and report regularly on its progress.
The office also wanted to hold in escrow any portion of the sale proceeds that might go to Harvey Weinstein, as well as a portion of Bob Weinstein’s share. The investor group has said that both Weinstein brothers will be wiped out in the deal.