The Ongoing Feud Between Bannon and Weinstein at a Head
$DIS, $WWE, $GS
A huge, ongoing lawsuit that accuses Harvey Weinstein of fraudulently using Steve Bannon’s old company, and ESPN, WWE, Discovery and others as a $130-M piggy bank.
In the days that the sexual assault allegations against film mogul Harvey Weinstein became public, Breitbart has been all over the scandal as an opportunity to showcase liberal hypocrisy in Hollywood.
In Y 2005, Steve Bannow was the Chairman of a company called Genius Products, it was then that Messrs Weinstein and Bannon crossed paths, it was a particularly important time for the movie mogul. Weinstein had just separated from Disney (NYSE:DIS) and was launching The Weinstein Co (TWC), he was searching for financing.
According to a proxy statement that Genius once filed with the SEC, about a month after Bob and Harvey Weinstein and Disney jointly announced the termination of their employment contracts, Steve Bannon and Genius CEO Trevor Drinkwater met with representatives of Goldman Sachs (NYSE:GS) where Mr. Bannon once worked as an investment banker.
They discussed the possibility of Genius Products as an alternative independent distributor for the Weinsteins’ new company.
In a story that ran in The New Yorker earlier this year that recounted Mr. Bannon’s time in Hollywood, Drinkwater nodded to this meeting in an interview. “Goldman Sachs was raising the money for The Weinstein Co., and Steve called one of his buddies at Goldman,” said Mr. Drinkwater.
Recently, Mr. Bannon has privately told people that his business with Harvey Weinstein is much ado about nothing because Genius came to distribute DVDs for about 50 companies.
Some of the facts
After a series of meetings in Y 2005 between Messrs Bannon and Drinkwater on 1 side and the the Brothers Weinsteins and other TWC management on the other, an agreement was hatched that gave TWC a 70% stake in Mr. Bannon’s old company.
And according to SEC and court filings, for a time, Genius was registered as The Weinstein Company Funding LLC and operated as a subsidiary.
In a Y 2007 Fortune story discussed how Wall Street was “starting to buzz” about the Weinstein’s interest in Genius. A few days after that article appeared, The New York Times ran a story headlined, “Using Genius, Are the Weinstein’s Plotting an I.P.O.?”
Genius picked up other customers, including ESPN, Discovery and Sesame Street.
In 2008 Genius collapsed, the reason and causes remains somewhat of a mystery, but I am certain now that the lights will shine on the transaction/s.
Remember that the Weinstein’s owned 70% of Genis’
Owed $8.5-M, WWE eventually forced Genius into involuntary bankruptcy in Y 2011.
Then, there is the alleged malfeasance put forward by Chapter 7 trustee Alfred Siegel in a $130-M fraud lawsuit in bankruptcy court.
At the same time that Harvey Weinstein was allegedly renting luxury hotels to harass and assault women, Mr. Siegel accuses Harvey Weinstein of essentially treating Steve Bannon’s old company as his piggy bank.
According to the complaint, Genius’ supposed independence was a sham.
In Y 2008, when Genius was running out of money, majority ownership was transferred to an investment firm, but Genius was allegedly forced to sign an “onerous and one-sided” amended distribution deal with TWC, and later a restructuring agreement that “no independent distributor would have entered into.”
Genius become insolvent, according to Mr. Siegel, and those other licensors; ESPN, Discovery, WWE became unwitting funders of Harvey Weinstein’s endeavors.
As the complaint puts it, “In order for [Genius] to operate at a loss to facilitate the Weinstein scheme, the Debtor needed 3rd parties to extend credit, which borrowed funds could be used to make transfers to Weinstein and pay overhead expenses. To obtain such borrowed funds, the Debtor entered into distribution agreements with third party licensors at market terms. Pursuant to the distribution agreements, the Debtor was obligated to timely pay proceeds to the licensors after retention of the negotiated distribution fee. Instead, the Debtor used the proceeds to make transfers to Weinstein and pay overhead expenses, thereby turning the 3rd party licensors into unsecured creditors who were not paid timely.”
In total, more than $130-M was counted as being transferred by Genius to TWC after 27 December 2007, which Mr. Siegel is now claiming is recoverable as fraudulent transfers. A judge has trimmed the claims, but is nevertheless allowing the lawsuit to proceed.
No trial date has been set in the Chapter 7 trustee’s lawsuit against TWC, but as investors in Weinstein’s business eye potential claims against him, the ongoing investigation into TWC’s finances may be spotlighted in forthcoming summary judgment papers.