Sale of Harvey Weinstein’s company up in air after lawsuit

New York’s attorney general said Monday that executives at Harvey Weinstein’s movie studio enabled and covered up dozens of sexual misconduct allegations against the Hollywood mogul and that any sale of the company must include compensation for victims and protections for employees.

Attorney General Eric Schneiderman said his office filed a lawsuit against the company on Sunday, as a deal was expected to close, to make sure that potential purchasers know the extent of “pervasive patterns of illegal activity” at The Weinstein Co. and to ensure executives involved in the alleged cover up are ousted.

Schneiderman said an offer from a group led by former U.S. Small Business Administrator Maria Contreras-Sweet would have put Weinstein Co. executive David Glasser in charge of the company despite evidence he failed to stop Weinstein and never had the human resources department launch a formal investigation into allegations against him.

Schneiderman said his office’s four-month investigation uncovered “a pervasive corporate culture that enabled, encouraged and sustained years of abusive conduct that should have been shut down by any corporate officers with any sense of integrity.”

“We have never seen anything as despicable as what we’ve seen here,” Schneiderman said.

Glasser and The Weinstein Company did not immediately respond to messages.

Schneiderman said he did not oppose the sale of the company behind Oscar winners “The King’s Speech” and “Silver Linings Playbook,” but that any deal must include assurances of financial compensation for women who say they were harassed or abused by Weinstein.

He said documents his office reviewed during its investigation showed that the Contreras-Sweet offer did not include any reference to a dedicated victim compensation fund and instead relied on insurance policies and a letter of credit that he said would be eaten up by legal fees and other expenses.

The deal also would have kept non-disclosure agreements in place that have been keeping Weinstein’s accusers from speaking publicly about his alleged misconduct, Schneiderman said.

Schneiderman says his office was told by Contreras-Sweet’s lawyers that they would not meet with him because the Weinstein Co. would not allow them to do so. He said that Contreras-Sweet had a brief conversation with one of his lawyers on Sunday but never made a promised call back.

“There’s been no effort on their part to cooperate with us at all,” Schneiderman said. “In fact, her attorney said, ‘why should we talk with you?’”

Representatives for Contreras-Sweet did not respond to emails and phone messages requesting comment.

The suit, filed in state court, accused Weinstein of “repeatedly and persistently” sexually harassing female workers, in violation of state employment and civil rights law. It said the company had an atmosphere of “pervasive sexual harassment, intimidation, and discrimination.”

Harvey Weinstein has repeatedly denied all accusations of nonconsensual sex. His New York attorney, Ben Brafman, released a statement Sunday evening saying many of the allegations against his client are “without merit.”

Jason Squire, the editor of The Movie Business Book, said the Weinstein Co.’s extensive film library continues to make it attractive to potential buyers at fire-sale prices because it would provide a source of evergreen revenue that can be adapted for emerging technologies and platforms.

Schneiderman’s demands for a heftier victim’s compensation fund could make the acquisition too expensive for the Contreras-Sweet group, Squire said. If so, the Weinstein Co.’s board would have to decide whether to lower its sales price or if “it’s simply not worth it and go into bankruptcy,” he said.

A sale of the company is seen as key to avoiding bankruptcy, which would make it more difficult for victims to get any compensation resulting from lawsuits.

The Weinstein Co. has moved to sell off most its most lucrative assets in the wake of the scandal. Last year, Warner Bros. acquired distribution rights for the movie “Paddington 2” for more than $30 million.