What’s The Verdict: The Weinstein Company Using Genius Products as a Personal Bank Account?

What’s The Verdict: The Weinstein Company Using Genius Products as a Personal Bank Account?

This past Thursday, a trustee for a bankrupt home video company, Genius Products, has filed a multi-million dollar multi-claim lawsuit against The Weinstein Company, with accusations of perpetrating a fraud scheme and demanding the return of more than $130 million!  It was in 2011 that Genius Products, LLC was forced into involuntary bankruptcy by World Wrestling Entertainment and two other companies over $8.5 mill in debt. According to the newest complaint from Chapter 7 trustee Alfred Siegel, by 2011 Genius Products was already in debt thanks to “onerous and one-sided” agreements forced upon it by The Weinstein Company.  Essentially, The Weinstein Company is being accused of treating Genius as its personal bank account and transforming ESPN, Discovery and Genius’ other licensors into unsecured creditors.

The attorney for The Weinstein Company says his client lists tens of millions on Genius and that Genius’ story does not align with the real story.  So, what is the story?

Weinstein formed Genius in 2005 gaining the exclusive rights to distribute Weinstein home videos in the US.  The following year, 2006, Genius would become an independent company and in accordance with an operating agreement, TWC held onto 70 percent.  Supposedly, becoming an independent company was a sham to mislead third parties, where Weinstein would have full control over Genius and distribution agreements that made it impossible for Genius to operate profitably. Another way in which Genius was allegedly disadvantaged by TWC is the requirement that it keep about 40 employees exclusively working on Weinstein titles at a cost of $2 mill per year.  Despite an exclusive right to distribute, Genius was not permitted to distribute in Blu-Ray and other new formats.

All in all, it looks like The Weinstein Company dictated the agreement terms in a way that pretty much all the revenue from the home video distribution was transferred to Weinstein and all expenses were paid the ‘Debtor’ or Genius Products. This is all said to have gone on for about 2 years, up until 2008 when Genius was seriously running out of money.   What happened next is that Weinstein transferred its majority ownership to an investment firm, Quadrant Management, Inc. as a means of removing itself from the relationship as a minimal cost.

While Genius Products claims this was a major fraud scheme, TWC claims that they were actually the victim in this whole series of events.  As litigation proceeds, there will be more to come, so, stay tuned on What’s The Verdict for updates!

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