Weinstein Company says it will file for bankruptcy

The Weinstein Company is moving closer to bankruptcy.The studio co-founded by Harvey Weinstein has been crippl...

Posted: Feb 26, 2018 9:53 PM
Updated: Feb 26, 2018 9:53 PM

The Weinstein Company is moving closer to bankruptcy.

The studio co-founded by Harvey Weinstein has been crippled by the sexual harassment and assault allegations that have been leveled against him. Now it appears that a deal to sell the studio's assets is falling apart.

The studio's board of directors said in a letter Sunday night that the would-be buyers were unwilling to provide interim financing to keep it afloat while the deal was finalized.

Without that cash, the company is on its last legs, the board indicated.

The group of investors seeking to buy the assets -- led by Maria Contreras-Sweet, former head of the U.S. Small Business Administration -- have not yet publicly responded to the board.

But a source involved with the talks confirmed that the investors have received the letter.

"They are trying to figure out if there's still a way forward," the source said.

The bankruptcy paperwork has not yet been filed, according to two sources, but it could be filed in the next few days.

In the Sunday night letter, Weinstein Co. accused the investors of an "illusory" bid.

"It is simply impossible to avoid the conclusion that you have no intention to sign an agreement -- much less to close one -- and no desire to save valuable assets and jobs," the letter stated.

It concluded, "We will now pursue the board's only viable option to maximize the company's remaining value: an orderly bankruptcy process."

Variety posted a copy of the letter on Sunday. CNN has not yet obtained a copy of it.

Weinstein was ousted from his role at The Weinstein Company last fall after numerous reports of sexual misconduct. He has been accused of sexual harassment or abuse by more than 60 women.

Weinstein has denied any accounts of non-consenusal sex.

Related: Weinstein Company sale in jeopardy

In the wake of the reports, many of the studio's business partners fled. New business opportunities dried up.

With bankruptry seen as a worst case scenario, the studio sought a buyer. In January it entered into exclusive talks with Contreras-Sweet's investor group. She promoted the idea of a new studio, led by women, with the Weinstein name wiped away.

In the meantime, the existing owners tried to keep the studio's doors open and keep staffers on payroll through a variety of financial maneuverings.

The deal talks were complicated two weeks ago when New York Attorney General Eric Schneiderman filed a lawsuit against Weinstein and his former company.

Schneiderman said that a four-month investigation into sexual harassment found "vicious and exploitative mistreatment of company employees." The suit cites what it calls "egregious" violations of state civil and human rights laws.

The state A.G. said he "will not stand in the way" of a sale if his concerns are addressed. He expressed three concerns: "Any deal must ensure first that victims will be adequately compensated;" that employees will be protected; and that executives who knew about Weinstein's alleged acts "will not be rewarded."

In the wake of the suit, the Weinstein Co. board forced out David Glasser, the company's COO, one of the executives who had been singled out by Schneiderman.

Last Wednesday there was a meeting involving Schneiderman's office and the would-be buyers of the studio. Both sides said it was "productive," indicating that an agreement was within reach.

But then came Sunday's letter from the board about the company's financial crunch.

Amid the lengthy talks -- first about the terms of the deal, then about addressing Schneiderman's concerns -- the troubled studio "simply ran out of money," a person involved in the deal said.

Now there's a lot of finger-pointing going on.

Schneiderman's office said in a statement on Monday that the recent talks had come up with a "clear path forward" on the issues raised by the lawsuit.

For example, Contreras-Sweet's investor group had committed to a victim compensation fund of up to $90 million.

"We are disappointed" that the parties "were unable to resolve their financial differences," Schneiderman's office said. "We will continue to pursue justice for victims in the event of the company's bankruptcy, and our investigation into the pattern of egregious abuse by Harvey Weinstein and his enablers is ongoing."

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