A bankruptcy court judge Monday confirmed a liquidation plan for the former Weinstein Co., which filed for Chapter 11 three years ago as disgraced mogul Harvey Weinstein imploded in a sea of sexual abuse and harassment accusations.
Weinstein the man is serving a 23-year sentence for rape and assault at a correctional facility in upstate New York. The assets of his company were sold to a private-equity firm, with proceeds going to secured creditors. A group of unsecured trade creditors and Weinstein victims have been arguing over how divide what’s left, basically settlement money offered by insurance companies.
After years, a large majority of both agreed to accept the latest iteration of the plan earlier this month that includes $17 million for a sexual misconduct claims fund that will be divided among the women, and another $8.4 million for other bankruptcy claims. It’s quite unusual to have bankruptcy case where one class of creditors are sexual abuse victims and the others are merchants.
“The mess that Harvey Weinstein left behind has been very hard to clean up,” the attorney for the Weinstein Co. estate Paul Zumbro said in his opening statement insisting the agreement is the best compromise available to make sure all parties received some compensation.
Four abuse victims objected to the arrangement, which requires them to release Harvey Weinstein and former officers and directors of his company, including brother Bob Weinstein from all future legal claims. They do have the option of accepting a lower payout — 25% of what they’d be entitled to — and still retain the right to go after Harvey in court, but no one else.
U.S. bankruptcy Judge Mary Walrath noted that “83% of Weinstein’s victims have expressed very loudly that they want closure through acceptance of this plan, that they do not seek to have to go through any further litigation to receive some recovery, some possible recompense for what was done to them, although it is clear that money alone will never give them that.”
“But I can only deal with the financial aspect of this and the bankruptcy code says that creditors should decide as a class how they want their claims to be treated,” she said, rendering her decision at the end of a two-and-half-hour hearing.
Some 48 people with sexual misconduct claims cast ballots, with 39 backing the deal. Four actively objected.
Bob Weinstein, who had been co-CEO, came up frequently in the hearing. Kevin Mintzer, an attorney for the objecting victims, called him particularly complicit in his brother’s crimes but noted that he would be shielded by the plan. Cases against Bob Weinstein have been dismissed by trial judges, he noted, but not by appellate courts. “If this settlement is approved, no one will get a chance to ever review these Robert Weinstein cases,” he said. Zumbro called Bob Weinstein a tangent and example of the opposition’s “tortuous” argument.
Mintzer also argued that insurers could have been pushed further to sweeten the pot if the current plan was scrapped.
Under the plan, Harvey Weinstein waived 100% of claims for all of his legal defense costs. Other former officers and directors of the company waived 50% of of legal-cost claims they would technically have had the right to.
“I do not accept that if everyone went back to the drawing board that there would be additional recovery, or substantial additional recovery,” the judge said. “I accept that the parties have negotiated in good faith.”
The objectors’ attorneys also called it unfair that that their clients, some of whom are rape victims, had the same standing in approving the plan as others who might have suffered only verbal abuse.
“I will not enter into whether one victim’s claim is more [valid] than another’s — that is going down a rabbit hole,” the judge said. “If they chose not to release Mr. Weinstein, they have the right to go to a jury trial.”
Debra Grassgreen, Counsel for the Unsecured Creditors’ Committee (including victims) said that in determining that the settlement was fair, “It is critical to consider that the plan balances the interests of the objectors by giving them their day in court… But it also takes into account the wishes of the rest of the women who voted — the ones who just want to move on with their lives and the last thing they want is to have to go through years of public litigation and risk getting nothing at the end – they want to stop the suffering. They want to find closure.”