The pending sale of the Weinstein Company to a group of investors who had planned to set up a victims' compensation fund and install a majority-women board of directors fell through Tuesday after they discovered millions in previously undisclosed debt.
The sell-off of the company cofounded by disgraced Hollywood mogul Harvey Weinstein had been announced last week, but according to a source close to the negotiations, the buyers learned on Tuesday that there was $64 million in undisclosed debt and other liabilities.
Maria Contreras-Sweet, the Obama-era leader of the Small Business Administration who had been spearheading the buyout, said she was disappointed by the discovery.
"We have received disappointing information about the viability of completing this transaction," Contreras-Sweet said. "As a result, we have decided to terminate this transaction."
Members of the Weinstein Company's board released a statement Tuesday saying they were disappointed by the decision of the investors to walk away.
"The investors’ excuse that they learned new information about the company’s financial condition is just that — an excuse. The company has been transparent about its dire financial condition to the point of announcing its own LIKELY bankruptcy last week," the board said. "We regret being correct that this buyer simply had no intention of following through on its promises. Nevertheless, this board will not quit. We will continue to work tirelessly — as we have for months — to determine if there are any viable options outside of bankruptcy. In the meantime, we continue to pursue an orderly bankruptcy process to maximize the company's value."
Negotiations with Contreras-Sweet and a group of investors led by billionaire Ron Burkle had stalled after New York Attorney General Eric Schneiderman filed a civil rights lawsuit against the Weinstein Company and its founders and questioned the existence of a promised victims’ fund.
The investors' mission had been to build a movie studio led by a board of directors made up of a majority of women, save jobs, and protect vendors who are owed money. Schneiderman's office signed off on the deal last week after getting the parties to agree to create a well-funded victims' compensation fund that would supplement existing insurance coverage for those who have allegedly been assaulted or harassed by Weinstein.
The deal would have given the investment group control over the studio's assets in a deal worth about $500 million, according to the Los Angeles Times, and give it a 51% stake in the company.
The studio has been in a tailspin since investigations by the New York Times and the New Yorker revealed decades of sexual harassment and assault allegations against Weinstein. And in recent weeks, the company has been on the verge of bankruptcy as the board tries to find a buyer.
Despite the breakdown of the deal, Contreras-Sweet said on Tuesday they are still considering purchasing some of the Weinstein Company's holdings.
"I believe that our vision to create a women-led film studio is still the correct course of action," she said. "To that end, we will consider acquiring assets that may become available in the event of bankruptcy proceedings, as well as other opportunities that may become available in the entertainment industry."
Schneiderman's press secretary, Amy Spitalnick, told BuzzFeed News the attorney general's office would be disappointed if the parties cannot work out their differences and close the deal. Meanwhile, Schneiderman's lawsuit against the Weinstein Company, Bob Weinstein, and Harvey Weinstein remains active.