N.Y. Attorney General Files Suit Against Weinstein Co. as Sale Talks Stall
New York Attorney General Eric Schneiderman's office had approached bidder Maria Contreras-Sweet about its concerns.
The sale of the embattled Weinstein Co. to an investor group led by Maria Contreras-Sweet, which was expected to wrap up Sunday, has stalled, as New York State Attorney General Eric Schneiderman's office filed a lawsuit against TWC and founders Harvey and Bob Weinstein alleging the company violated the state's civil rights, human rights and business laws.
The suit — filed against Harvey Weinstein, Bob Weinstein and TWC — alleges the parties engaged in "a years-long gender-based hostile work environment, a pattern of quid pro quo sexual harassment, and routine misuse of corporate resources for unlawful ends that extended from in or about 2005 through at least in or about October 2017."
Contreras-Sweet, a former member of the Obama administration, has made a $500 million bid to buy TWC and install a female-majority board, but that prospect is now in doubt because of the moves by the attorney general's office, which has been separately investigating several sexual assault claims against former TWC co-founder Harvey Weinstein.
According to sources, Schneiderman and his team have serious concerns about a proposed sale of TWC, including the fact that current COO David Glasser would be appointed CEO. In recent weeks, the AG’s office had been talking to former TWC employees about the work environment.
The lawsuit does not try to block the sale. However, once the sale contract is signed, the AG’s office would have 30 days to file a temporary restraining order in an attempt to block the transfer.
In a statement regarding the suit, Schneiderman said, "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."
In recent days, the AG’s office put forth a wish list of items to discuss as part of any sale, such as a victim’s compensation fund, according to sources. Contreras-Sweet returned calls to AG staff over the weekend, but said she couldn’t discuss any substantive conversations because of non-disclosure agreements signed as part of the negotiating process.
Insiders say the AG’s office doesn’t want to have ongoing involvement in the management of any new company, but has broached the idea of having a third party monitor certain aspects of it.
According to another source familiar with the negotiations, TWC's attorneys, citing non-disclosure agreements, prevented Contreras-Sweet from speaking with the attorney general's office until this weekend. She was told that the attorney general's office wants assurances that a third party will oversee the new board, an idea that her investor group has rejected.
The TWC board issued a statement Sunday night denying it tried to stop Contreas-Sweet from communicating with the AG's office. It also disputed many of the allegations. "We are disappointed that the New York Attorney General felt it necessary to file today’s complaint. Many of the allegations relating to the Board are inaccurate and the Board looks forward to bringing the facts to light as part of its ongoing commitment to resolve this difficult situation in the most appropriate way," said the statement.
"With respect to the Company’s ongoing sale process, the Board sought a transaction to preserve jobs and create a victim fund. Any suggestion that the Company or its Board somehow impeded or discouraged the buyer’s access to the New York Attorney General is simply untrue. Indeed, the Company and its Board actively encouraged the buyer to communicate with the Attorney General. The Company looks forward to continuing our discussions with the Attorney General in order to reach our common goal of bringing this situation to an appropriate resolution," the statement continued.
Contreras-Sweet's bid — backed by billionaire Ron Burkle, among others — would assume $225 million in debt. According to sources, it would also guarantee a $50 million fund to cover any claims brought against the company that were not covered by insurance. The suit, however, raises the question of whether the fund set aside is sufficient to handle all the claims that have been brought against the company.
The group has had an exclusive negotiating window, which was to have ended Sunday.
Feb. 11, 8 p.m. Updated with a statement from TWC board.