UPDATE: Board members Lance Maerov and Tarak Ben Ammar strongly refute the notion that they had any knowledge of the indiscretions by Harvey Weinstein before they broke in press reports in The New York Times and The New Yorker, contrary to an email that Deadline reviewed from TWC exec Irwin Reiter that implied otherwise. Both Maerov and Ben Ammar said that they were the independent directors who terminated Weinstein when they learned of the indiscretions and that they created an independent investigative committee to get to the bottom of the allegations. Maerov called the email “deceptively misleading  as the email you referenced was sent well after Tarak and I and Bob terminated Harvey. It is in the interest of the person who shared it with you to create a false representation of the fact’s and the board’s knowledge of them.”

EARLIER: In a development that throws a major hitch into the imminent acquisition of the assets of The Weinstein Company and the continued employment of the staff there, New York Attorney General Eric Schneiderman will file a civil rights lawsuit as soon as tomorrow that names TWC and co-chairmen Harvey Weinstein and his brother Bob Weinstein as defendants, sources said.

This doesn’t help the deal that was about to close in time to avoid bankruptcy, one that would allow the new company to regain footing with a different name, keep its current employees, and be fueled by the film library and development projects, via an investor group led by Maria Contreras-Sweet. The buyers have promised $500 million, including $225 million in assumed debt, plus a victims compensation and an immediate cash infusion to keep the lights on.

The NY AG started making headlines on this Saturday night in the New York Daily News, threatening to block the signing of a deal for the purchase agreement unless there is further “good faith” negotiations. So, as of today, with the jobs of 150 to 200 Weinstein Co. employees on the line, no purchase agreement has been signed and bankruptcy continues to loom. It is unclear whether the AG has any jurisdictional authority to stop or slow any transaction, but the attendant followup stories today have certainly made noise that puts pressure on strengthening safeguards and protections of lawsuits to come.

What’s at issue? Schneiderman has requested that there be more negotiation for oversight. His office has questioned the logic of having Weinstein Co. executive David Glasser as CEO because the exec was part of management when the company failed to protect its employees; the second issue is whether there would be enough money set aside for the victim’s comp fund. Right now, under the Contreras-Sweet-led scenario, the victim’s fund would hold a $10M letter of credit to backstop the insurance company (the $60M that is available).

There is a lot of spin being thrown around right now. One version we’ve heard is that when the AG office initially made its inquiry, the board and Bob Weinstein tried to keep Yucaipa’s Ron Burkle and Contreras-Sweet out of it, and wanted to negotiate a settlement that protected their interests. The board is potentially culpable as it has been widely reported that the board approved a Weinstein contract that permitted him to pay settlements and keep his job. Sources said that Burkle and Contreras-Sweet are now in those talks, but they won’t run a company that gives oversight to politicians and lawyers, beyond the statutes that are agreed to.

Deadline has seen emails from company higher-ups Irwin Reiter, Glasser and Andy Kim to the board that describe in detail pleas made to the board regarding harassment allegations made by employees including Emily Nestor and Lauren O’Connor whose stories have been made public. Those emails, directed toward board members Lance Maerov, Tarak Ben Ammar and others, have all been turned over by the company to the AG.

Even if the AG doesn’t have jurisdiction to block funds or halt a transaction, the specter of lawsuit could delay it, which would plunge the company into a bankruptcy scenario. A meeting today was expected to yield a deal, but let’s see what happens. Clearly, lawsuits will be filed.

“The deal as it stands basically doesn’t have any real compensation fund for all intensive purposes, it basically tells victims to go fight with the insurance companies if you want to be compensated,” an individual with extensive knowledge of the NY AG’s investigation told Deadline today. “Additionally, there are no assurances what so ever from leadership that they would be putting in place protections for current and future employees,” the source also said, and that source cast doubt on Glasser, even though another email from the AG’s office offering a settlement did not name put any conditions against him running the new company.

The AG, we’re told, wants Contreras-Sweet and her female-led board to agree to best interest oversight on the fund and to have “a good-faith” negotiation about this. The ask for a negotiation about a safeguard then was questioned by the investor side because they have a female-led board and females on the board (“It was an offensive ask,” the source said), but on top of that, Bob Weinstein blocked Contreras-Sweet from returning the AG’s call because he wanted to enforce the non-disclosure agreement. That led to ruffled feathers with the AG.

She apparently did finally talk to them last week and learned of the conditions; nothing has been resolved. The Contreras-Sweet-led investor bid was for $500M, including $225M in assumed debt (plus the victim comp fund).

The escalation of this lawsuit, the discovery phase and spinning should provide the most realistic look at what happened at The Weinstein Company, and who was responsible for what. A bankruptcy could provide information that would not otherwise be known to the AG. How that impacts the futures of the employees who’ve hung in since the Weinstein scandal broke in October is another matter.

Deadline’s Dominic Patten contributed to this report