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

A proposed deal to sell Harvey Weinstein's movie studio would have rewarded an executive accused of covering up for the Hollywood mogul while skimping on compensation for dozens of women who have accused him of sexual misconduct, New York's attorney general said on Monday.

Attorney General Eric Schneiderman filed a lawsuit against The Weinstein Co. on Sunday as a group led by former U.S. Small Business Administrator Maria Contreras-Sweet was expected to close on a deal to take over the studio behind Oscar winners "The King's Speech" and "Silver Linings Playbook."

Schneiderman said Contreras-Sweet's offer would have put Weinstein Co. president David Glasser in charge of the company despite evidence that he failed to stop Weinstein and never had the studio's human resources department launch a formal investigation into allegations against him.

Schneiderman, a Democrat, said he did not oppose a sale but said any deal must rid the company of executives who covered up Weinstein's misconduct.

"If any prospective buyers are interested in turning the page and doing right by (Weinstein Co.) employees and victims who were abused for years, they can and will fix these problems with the deal," Schneiderman said. "We will not stand in their way."

He said documents reviewed by his office 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.

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

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

Schneiderman's lawsuit, filed in state court, accused Weinstein of persistently sexually harassing female workers and creating a corporate culture that enabled years of abusive conduct.

"We have never seen anything as despicable as what we've seen here," Schneiderman said.

Gloria Allred, a lawyer for some of Weinstein's accusers, said Contreras-Sweet's group is "100 percent committed to helping victims" and that she is "extremely disappointed" by Schneiderman's action. Allred said she worried stopping the sale would lead the Weinstein Co. to file for bankruptcy protection, making it difficult for victims to get any compensation.

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.

The Weinstein Co. has moved to sell off 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.

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 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?'"