How the Weinstein Company’s Bankruptcy and Potential Sale Impact Victims
Seven months after the first women came forward with allegations of sexual harassment and assault against Hollywood mogul Harvey Weinstein, a court earlier this month approved the sale of the Weinstein Company, the film studio Weinstein co-founded with his brother in 2005.
The beleaguered studio, which is deeply in debt and facing an array of lawsuits, has been in turmoil since October, when dozens of women went public with accusations of sexual misconduct against its co-founder going back decades. To date, over a hundred women have come forward with allegations. Now, the circumstances under which the sale of the studio was approved may create new hurdles for those alleged victims who are seeking compensation from the Weinstein Company.
When it comes to the list of creditors and others demanding money from the company, the alleged victims “don’t come at the very bottom, but they’re next to the very bottom,” Adam Levitin, a Georgetown Law professor who specializes in bankruptcy, told FRONTLINE.
The victims weren’t always so low on the list. In February, an investor group led by Maria Contreras-Sweet, a former Obama administration official, and backed by billionaire Ron Burkle and Lantern Capital, made a $500 million bid for the Weinstein Company’s assets. The group’s bid reportedly included a settlement fund for victims of $20 to $30 million.
Then, just as the deal was being finalized, the office of New York Attorney General Eric Schneiderman filed a civil lawsuit against the Weinstein Company on Feb. 11. The suit alleged that Weinstein Company’s executives and board repeatedly failed to take steps to protect employees from Weinstein’s behavior. The office also weighed in on the sale, objecting to the company’s leadership, harassment policies — and the small size of the victim compensation fund.
In an attempt to salvage the bid, the Weinstein Company fired its chief operating officer, David Glasser. The potential buyers also met with Schneiderman and discussed plans to create a victim compensation fund with up to $90 million, according to The New York Times. Ultimately, the deal collapsed in early March.
On March 19, the Weinstein Company filed for bankruptcy protection, which stalled all the lawsuits pending against it. It also said that anyone “who suffered or witnessed any form of sexual misconduct by Harvey Weinstein” would be released from any nondisclosure agreements they signed promising not to discuss what happened.
But bankruptcy also means that the women who filed lawsuits against the company would join the end of a long line of people and entities waiting for compensation. The first in line would be financial institutions that loaned the Weinstein Company money. “The bankruptcy court really doesn’t have leeway to consider that there’s a particularly sympathetic class of victims,” Levitin said.
Weinstein has denied any non-consensual sexual conduct, and through a spokeswoman has told FRONTLINE he is deeply apologetic to those offended by his behavior. The company’s board has previously said that it had no knowledge of Weinstein’s alleged misconduct.
On May 8, a Delaware bankruptcy court approved the sale of the Weinstein Company’s assets to Lantern Capital, a Texas-based private equity firm, for $310 million in cash, and the assumption of $115 million in debt. Approval of the deal was already in motion when, in a surreal twist, Schneiderman himself resigned on May 8 after a report in The New Yorker that he physically assaulted four women who had romantic relationships or encounters with him.
The New York attorney general’s office has since said its lawsuit against the Weinstein Company is still active and the investigation is ongoing. “From the start, including throughout the bankruptcy process, we’ve been actively fighting to ensure that victims are compensated, employees are protected, and wrongdoers are not rewarded,” said Amy Spitalnick, press secretary for the attorney general’s office.
The new deal — which has yet to officially close — does not currently include a victims’ compensation fund. Money from the sale will be used to reimburse those owed money by the Weinstein Company. Depending on how much is available, and how much the Weinstein Company owes to its creditors, there’s a chance that there may not be enough left for all of Weinstein’s alleged victims once everyone else is paid. However, negotiations are still forthcoming. A person close to the talks said the women’s voices are being taken into consideration.
Lantern Capital declined to comment on the record.
Victims may also have other options. The company’s bankruptcy does not exempt Harvey Weinstein, other individuals or entities from liability in this case. The Weinstein Company — as well as its top executives — have insurance that could provide some relief.
“The bankruptcy only affects a single defendant — the Weinstein Company,” Cris Armenta, one of the plaintiffs’ attorneys in a class action suit against the company, told FRONTLINE. “Our plan and our hope is that there will be… sufficient compensation for our clients at the end of the day.”
— Nick Verbitsky contributed reporting.