Weinstein: Will Filmdom's CEO of Sex Harassment be Forced to File a BK?

LA WATCHDOG--On Monday, The Weinstein Company (the “Company”) “announced that it has entered into a preliminary agreement with Colony Capital (“Colony”) to provide an immediate capital infusion into the Company. In addition, the Company has entered a negotiating period with Colony Capital for a potential sale of all or a significant portion of the Company's assets.” 

The Weinstein Company Announces Investment from Colony Capital. 

The Weinstein Company has been under siege since early October when The New York Times revealed sexual harassment and rape allegations against Harvey Weinstein, the Company’s founder, co-chairman, and celebrated rainmaker. 

As a result of Harvey Weinstein’s rampant sexual misconduct, the Company in its current form is essentially out of business.  After all, what self-respecting member of the Hollywood community, whether it be the talent or their agents, would work with (or even talk to) this sexual predator. 

The exodus of talent and the loss of reputation raises questions about the Company’s continued viability, prompting rumors of a bankruptcy, a sale of the company or its assets, or a major restructuring.  As a result, the nervous banks are pressing the Company to repay its loans. 

This cash crunch is further aggravated by the Company’s vendors, some of whom are demanding to be paid upfront rather than extending credit on customary terms. 

The investment by Los Angeles based Colony will relieve the immediate pressure on the Company and its business and give it some breathing room to sell the Company’s organization and assets to a newly formed company controlled by Colony.  The value of an on-going operation dwarfs the value in a fire sale.  

However, Colony, an experienced investor with extensive industry knowledge, will not assume any of the Company’s liabilities, especially those related to Harvey Weinstein’s sexual misconduct. 

But the sale of the Company’s assets will not end Harvey Weinstein’s exposure to extensive financial and criminal liabilities. 

More than likely, other women will come forward with their stories of sexual abuse, resulting in additional payments and substantial legal fees, all at Harvey’s expense, and criminal charges. 

But the real financial exposure is from the outside investors whose 58% investment in the Company appears to be worthless after the repayment of the bank debt and other liabilities.  More than likely, the investors will be forced to sue the Company, its negligent directors, and Harvey Weinstein to recoup a portion of the lost value. And all this will eventually be Harvey Weinstein’s responsibility, including ever mounting legal fees. (Photo left: Weinstein offices in Manhattan.) 

Harvey Weinstein has been rumored to be worth more than $250 million.  But many feel that this is a highly inflated number, especially given the Company’s recent less than stellar performance and now that his 26% interest in the Company is worthless.  He also appears to be dependent on the Company to help support his extravagant lifestyle.  

There is also talk that Harvey Weinstein, like the disgraced Roger Ailes of Fox News, may move to Florida where the state’s homestead laws prevent the seizure of a homesteaded property to pay for judgments. 

Even if Harvey Weinstein is able to avoid bankruptcy, he may not be able to avoid jail as the authorities in London, New York, and other jurisdictions are investigating whether his actions warrant his arrest, prosecution, and incarceration. 

Bankruptcy and jail are appropriate, says this father of three daughters.  

  • See Also: Business Wire Report -- “The Weinstein Company Announces Investment from Colony Capital” 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  He can be reached at:  lajack@gmail.com.)