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Deal Talks to Sell Weinstein Co. Collapse After New York Attorney General Files Lawsuit

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A proposed deal to sell troubled Weinstein Co. fell apart Sunday after the New York attorney general filed a lawsuit against the independent movie studio and its co-founders, Bob and Harvey Weinstein.

A group led by businesswoman Maria Contreras-Sweet was “about to consummate” a purchase of Weinstein Co. for close to $500 million, including the assumption of debt, when the attorney general filed the suit Sunday, said a person close to the transaction.

Though the attorney general didn’t seek a restraining order halting the sale, the lawsuit introduced too much uncertainty for the deal to go ahead, people close to the talks said.

“The board’s whole purpose here was to try to keep this a going concern, save jobs—there’s over 100 people’s jobs at stake—and we were taking no equity,” Bob Weinstein said. “I hope that this deal does not go away for these people’s jobs’ because then there will be nobody monitoring anything.”

The lawsuit, filed in New York County Supreme Court, caps a four-month investigation by Attorney General Eric Schneiderman’s office into the company behind “The King’s Speech” and “Django Unchained” that included interviews with employees and executives as well as a review of records. It alleges longstanding sexual harassment and other civil-rights violations.

In the lawsuit, the attorney general’s office said it filed Sunday due in part to “the possible imminent sale” of Weinstein Co., which it said “could leave survivors of Respondents’ unlawful conduct without adequate redress [and] enable perpetrators or enablers of misconduct to obtain unwarranted financial benefits.”

The suit alleged that assistants were required to facilitate Harvey Weinstein’s sex life and were sometimes harassed or intimidated into sexual relationships with him. Harvey Weinstein threatened his employees with violence or dismissal from their jobs if they didn’t acquiesce to his demands, the suit said.

Harvey Weinstein’s attorney said in a statement, “We believe that a fair investigation by Mr. Schneiderman will demonstrate that many of the allegations against Harvey Weinstein are without merit. While Mr. Weinstein’s behavior was not without fault, there certainly was no criminality.”

Harvey Weinstein was fired from Weinstein Co. on Oct. 8 following allegations of sexual misconduct and assault.

Mr. Schneiderman’s office said repeated reports of such behavior were given to the human resources department and that the department “variously claimed there was ‘nothing’ that could be done to address the misconduct; immediately informed [Harvey Weinstein] of the complaint, thereby facilitating retaliation by [him] against the complainant; or helped facilitate swift departure of the complainant from the company in connection with a settlement.”

The lawsuit stated Bob Weinstein, in his role as co-chairman, failed to investigate and root out the harassment. Bob Weinstein referred questions about allegations against him in the lawsuit to his attorney, who didn’t immediately respond to a request for comment.

Ms. Contreras-Sweet previously said that she planned to establish a settlement fund for victims of Harvey Weinstein’s alleged misconduct to back up the studio’s insurance policy.

Ron Burkle’s Yucaipa Capital and investment firm Lantern Capital were backing her offer to buy the company.

The lawsuit and the canceled sale are just the latest chaos to envelop Weinstein Co. since allegations of sexual misconduct by Harvey Weinstein first emerged in October. The studio has been unable to engage in much business, including releasing new movies, as it has sought a new owner while facing lawsuits and government investigations.

Sunday’s development make it likely Weinstein Co., saddled with about $250 million of debt, will enter bankruptcy reorganization, said people close to the company.

Last Tuesday, Mr. Schneiderman’s office proposed terms for a settlement that included a monitor approved by the attorney general for the company following a sale and “payment of penalty and appropriate admission of responsibility by TWC for acts and omissions by former leadership/corporation.” An e-mail with the proposed terms was viewed by The Wall Street Journal.

The settlement talks didn’t progress far, however. Ms. Contreras-Sweet met with the attorney general’s office for the first time Saturday and had proposed to meet again Monday after consulting with her attorneys, a person with knowledge of the discussion said.

In its lawsuit, the attorney general objected to Ms. Contreras-Sweet’s plan to make Weinstein Co. chief operating officer David Glasser head of the studio following her purchase.

The suit expressed concern that Weinstein Co. employees “would be reporting to some of the same managers (including TWC’s Chief Operating Officer (‘COO’)) who failed to investigate [Harvey Weinstein’s] ongoing misconduct or adequately protect female employees from” him.

Mr. Glasser declined to comment on the allegation.

Write to Ben Fritz at ben.fritz@wsj.com, Keach Hagey at keach.hagey@wsj.com and Mike Vilensky at mike.vilensky@dowjones.com

Appeared in the February 12, 2018, print edition as ‘Deal for Weinstein Co. Falls Apart After Suit.’



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