While the Harvey Weinstein's sexual harassment scandal continues to unravel, we're also learning how the Hollywood heavyweight threw his weight around to allegedly funnel money donated for AIDS research to another charity in order to avoid financial losses on a theater production.
In a detailed report based on months of investigation, HuffPost's Yashar Ali reveals a "highly unusual financial transaction" involving Weinstein and American Foundation for AIDS Research's non-executive chair Kenneth Cole.
Through the deal that even amfAR staff and board members worried was shady, Ali reports, Weinstein would "solve a nagging financial obligation he had to one organization while supporting an organization that brought him praise from celebrities and other powerful figures in the entertainment business. Weinstein relished his role as a patron of the arts and progressive causes, and this idea would burnish his reputation in both capacities."
Ali reported the now-disgraced movie mogul needed to raise $600,000 for the nonprofit American Repertory Theater, which had staged a trial run of Weinstein's Broadway-bound musical Finding Neverland. The theater had an "arrangement whereby it would reimburse Weinstein and other show investors for money they put into the trial run, provided the investors got third parties to donate the amounts.” There was also a timeline involved: the money needed to be in ART's bank account by June 1st or Weinstein would lose over half a million dollars.
To get the $600,000 from a third-party organization, Weinstein made a deal with amfAR, an organization Weinstein had supported for decades. Ultimately, Weinstein had several items to offer amfAR for an upcoming fundraising auction at an event in Cannes, France, including photoshoots with the fashion photographer Mario Testino and tickets to an Oscar party. (Notably, writes Ali, these items cost Weinstein nothing: Testino donated his time and the Oscar party was hosted by Weinstein’s company.)
Weinstein spoke to Cole, the fashion designer and longtime non-executive chairman of amfAR, who agreed to split the proceeds of the auction lots (which they reportedly projected would bring in at least $1.2 million) with the Theater group receiving $600,000 and all other proceeds going to amfAR. This agreement worried insiders already — especially since auction bidders were not told upfront that their money would be split between amfAR and ART.
According to Ali, amfAR CEO Kevin Frost had always declined offers to split auction proceeds in the past, not wanting to complicate their financial dealings (which are legally required to conform to certain IRS codes including a rule that “an individual is not entitled to unjustly enrich himself at the organization’s expense”). But when amfAR staff members reportedly questioned whether the deal was ethical and recommended against it, Cole went ahead.
Things began to become more complicated when the auction failed to bring in expected $1.2 million. Cole agreed not to take a 50/50 split but instead allowed $600,000 to go to ART and the remaining $300,000 to go to amfAR.
But as June 1st was rapidly approaching, and some of the winning bids yet to be paid and the transactions yet to be complete, Weinstein began making another highly unusual demand. He wanted amfAR to give ART the expected $600,000 before it donations even arrived in amfAR's coffers. If any of the bidders failed to come through, amfAR could be out hundreds of thousands of dollars. Despite Cole's prodding, the board refused to go along with that agreement.
Instead, Ali writes, Weinstein eventually agreed to front the $600,000 himself. But since the money needed to come from a third-party, he wanted to "loan" the money to amfAR, have the AIDS charity give money to ART. Once again, the staff objected. On June 1, 2015 amfAR CEO Frost reportedly emailed amfAR CFO Bradley Jensen: "I’m going on record on here to express my concerns about this whole process. I have expressed to Kenneth [Cole] that I don’t believe amfAR should execute this transfer of funds prior to hearing a judgment from our auditors. Nothing about this deal feels right to me and I believe we have not done due diligence to understand exactly what this money is being directed to or why amfAR is being used to facilitate these transfers. Kenneth has heard my concerns and despite that is directing amfAR to execute this transfer to ART in fulfillment of an agreement he made with Harvey Weinstein."
Eventually, amfAR paid for an investigation into the transaction. That itself is a winding tale of possible Weinstein influence, which is worth the read as Ali unwinds the convoluted story. Suffice it to say that stories about Weinstein's sexual harassment proclivities surfaced, and one of the investigators reported the transaction was “'to satisfy a commercial transaction,' which could be against IRS rules related to private benefit."
Cole allegedly didn't come off well in the report and the remaining board was reportedly considering removing Cole from the position he'd held for 12 years. Then one firm that had compiled an investigation asked amfAR board members to sign a nondisclosure agreement. They expressed reticence and reportedly then heard from Weinstein representatives who offered a $1 million donation to amfAR over a five year period, Ali writes, contingent on the condition that "all the board members sign the non-disclosure agreement. Another proviso: Weinstein would donate the funds only if Cole remained non-executive chairman of amfAR."
While that donation was allegedly rejected, Cole remains in his position. Several members quit over the scandal. The debacle has already cost the AIDS research charity hundreds of thousands of dollars — the investigative firm itself reportedly billed the organization nearly half a million dollars (and that was at a 50 percent discount).
But the story doesn't end here. The New York Attorney General Eric Schneiderman has reportedly launched "an investigation into the amfAR-ART transaction, as well as a probe into amfAR’s corporate governance procedures," Ali writes.
Plus reached out to Kenneth Cole for his response to Ali's article. Cole's statement, in its entirety, read: "Since joining amfAR’s board three decades ago, I made the organization’s mission to save lives and find a cure for HIV/AIDS my own. During that time, amfAR has seen its annual revenues triple to more than $50 million and launched the greatest expansion of the foundation’s grantmaking with its $100 million investment strategy in support of its Countdown to a Cure for AIDS Initiative. As a result, the organization has played a significant role in breakthroughs for AIDS research, treatment, and prevention. In regards to the actions of Harvey Weinstein recently revealed in media reports, let me repeat publicly what I have been saying privately: I find his actions deeply disturbing but if there is any good to come out these revelations it is the start of a penetrating self-reflection of our society and our collective behavior.
Over the last several weeks Weinstein's charitable role in supporting amfAR has become the subject of debate and scrutiny. After the New York Attorney General’s Office reviewed the transaction between amfAR and Weinstein they declined to pursue an investigation. It did, however, highlight opportunities to strengthen the governance of the organization. I am personally committed to implementing the OAG’s recommendations to ensure that our fundraising policies and procedures are never called into question again. The mission is too important, there remain millions of lives at risk and the work is far from finished to allow any of us to be distracted from the task of conquering HIV/AIDS."— Kenneth Cole, Chairman, amfAR