The Weinstein Company, the production outfit behind films including The Kings Speech, Carol and The Butler, has little chance of surviving allegations of sexual assault and rape that have engulfed co-founder Harvey Weinstein even if it gets a new name, entertainment industry lawyers have warned.
The company, they say, is vulnerable to potential investor and victim lawsuits despite claims by the board – which includes Harvey’s brother, Bob Weinstein – that it had no knowledge of any misconduct.
In a statement, the company said the allegations had “come as an utter surprise to the board. Any suggestion that the board had knowledge of this conduct is false.”
In a further statement issued after the New Yorker detailed allegations of rape, the TWC board said it was “shocked and dismayed” and “committed to assisting with our full energies in all criminal or other investigations of these alleged acts”.
Weinstein has now been accused by more than a dozen women of making unwanted sexual advances or of touching them sexually without their consent. He has said many of the details of those public accounts are inaccurate and he has denied accusations of criminal sexual harassment, rape and sexual assault.
Sallie Hofmeister, a spokesperson for Weinstein, said: “Any allegations of non-consensual sex are unequivocally denied by Mr Weinstein. With respect to any women who have made allegations on the record, Mr Weinstein believes that all of these relationships were consensual.”
Claims by TWC directors that they knew nothing of Weinstein’s activities have been severely undermined by David Boies, who represented Weinstein in his 2015 contract negotiation. Boies has said the board was aware at the time of three or four settlements with women.
“I would be surprised if the board isn’t talking seriously about, ‘What are our options for liquidation,’” said Eric Talley, professor of corporate law and finance at Columbia University. “Investors in the company may already be consulting their legal advisers what their claims might be, so of course it makes sense for the board to say, ‘This is the first we’ve heard of it.’”
Under US law, shareholders could argue that keeping a known serial harasser on the board was a breach of their fiduciary obligations to the company. They could, Talley said, argue: “‘Listen, you were the ones supposed to be look out for the assets of this company and in the end you were reckless and negligent in doing so and in fact actively helped to cover it up and that imperilled the welfare of this company,’.”
Aside from questions of liability in connection to what the board did or did not know, the larger issue for the board is whether the scandal has permanently besmirched TWC’s potential to be profitable.
“Given how central Harvey Weinstein was to the company, and how much its fortunes were tied up with him personally, to what extent can it go forward?” Talley asked. “These are real issues not easy to content with.”
On Friday, the Wall Street Journal reported that the company was exploring a sale or shutdown. Interested buyers have approached board members, the report said.
In a statement reported by the Journal, Bob Weinstein said: “Our banks, partners and shareholders are fully supportive of the company and it is untrue that the company or board is exploring a sale or shutdown.”
The cost of the scandal has begun to emerge. Hours after defending Weinstein at film festival in South Korea, director Oliver Stone pasted a message on Facebook saying he would “recuse” himself from Showtime’s Guantánamo series “as long as the Weinstein Company is involved”.
Amazon Studios – now under its own sexual harassment storm with studio head Roy Price placed on leave of absence – is trying to buy out TWC’s interest in two drama series – The Romanoffs and an untitled David O Russell project starring Julianne Moore and Robert De Niro. But the actor Rose McGowan, who has said Weinstein raped her in 1997, has criticized Amazon for being in business with TWC and called on chief executive Jeff Bezos to cut ties with the company.
Rival production houses are circling a TWC musical, In The Heights. On Wednesday, writer Quiara Alegria Hudes tweeted her desire to remove the project from TWC, a message composer Lin-Manuel Miranda then retweeted.
Promotional plans tare also being affected. Michael Mitnick, writer of The Current War, a Weinstein-distributed picture, pulled out of a New York film festival panel to avoid questions about the scandal, according to Variety.
The company, which is around 45% owned by the Weinstein brothers, has valuable assets including a film library of around 525 titles and a TV division that includes Project Runway and its spinoffs, and which Harvey Weinstein estimated was worth “anywhere between $500m and $900m” in an interview with Deadline.
In 2015, though, a $950m deal to sell TWC’s TV assets to the British network ITV came unstuck after Manhattan district attorney Cyrus Vance announced his office was looking into a claim by an Italian model, Ambra Battilana Guttierez, that Weinstein sexually assaulted her. Vance dropped the case, a controversial decision that is now coming under renewed scrutiny.
A house divided
According to Variety, TWC co-chair Bob Weinstein and chief operating officer David Glasser think the firm should try to ride out the storm while its own lawyers investigate the allegations. The other board members, Lance Maerov, Ben Ammar and Richard Koenigsberg, are believed to be pushing for a sale.
According to Jonathan Hyman of law firm Meyers, Roman, Freidberg & Lewis, the best recent example of a board of directors sued for failing to remedy sexual harassment by its chief executive involved American Apparel and Dov Charney.
Charney has consistently denied sexual harassment allegations made against him by his own employees. Several claims were settled by American Apparel’s insurers; others were settled only on allegations that did not relate to sexual harassment. Claims against American Apparel’s board were dismissed because the plaintiffs failed to make a settlement demand.
Charney challenged his dismissal, but the case was thrown out of court.
According to TMZ, Weinstein’s contract included a clause preventing his dismissal on harassment grounds so long as he paid the settlements and fines. The website also reported that he is planning to challenge his firing at a board meeting on Tuesday.
A criminal case against Weinstein may be difficult to build but TWC could still be liable for civil lawsuits. That path, though, would also be far from straightforward. Under California law, the company could be liable. But in California the statute of limitations for civil sexual assault is two years. In New York, where the Battilana Guttierez assault is alleged to have taken place, it is three.
“If the claims come from Weinstein employees, some of the more recent could flow through Harvey Weinstein to the company for the harassment,” said Hyman. “If they were independent contractors like the actors who are coming forward, that’s more tricky. A company is only to be liable for acts by an employee to a third party done with the scope of employment.
“Most employers would tell you that because they don’t condone harassment, it’s outside the scope of employment so [they] should not be liable for his intentional harassing acts.”
But, said Hyman, if there are things the company knew, or should have known but ignored, or if it saw payments going out but did not ask what they were for, there will be liability issues.
TWC’s board could have reason to be anxious, especially given the the high public profile of the situation, Hyman said.
“If I was a director, I would be concerned about what I knew, or what should I have known, and [if I] did nothing but sign off on payments to various people, sure.”