Harvey Weinstein and Kenneth Cole reportedly covered up a suspicious deal involving a charity

Pascal Le Segretain/Getty

(L-R) Kenneth Cole and Harvey Weinstein.

• Harvey Weinstein allegedly owed $600,000 to the American Repertory Theater (ART) for staging a trial run of Broadway-bound "Finding Neverland," which he produced.
• To pay it off, he allegedly made a deal with Kenneth Cole to split proceeds of an amfAR auction item, which would allow amfAR to wire $600,000 to ART.
• After others at amfAR grew skeptical of the agreement, the two allegedly took drastic steps to cover up the deal, which may have been against IRS charity rules.

Since June 2015, the American Foundation for AIDS Research (amfAR) has been embroiled in an internal scandal that involves two of the nonprofit's major players, Harvey Weinstein and Kenneth Cole, following a financial deal between the two that's since fallen under scrutiny.

The scandal has led to numerous board members resigning and an investigation by the New York attorney general's office.

According to an investigative report from The Huffington Post published Wednesday, Weinstein and Cole - the clothing designer and non-executive chairman of amfAR for over a decade - allegedly covered up an agreement the two had to split the proceeds of an auction item for a 2015 fundraising gala in Cannes.

The Huffington Post reports that the series of events began when Weinstein needed pay $600,000 by June 1 to the American Repertory Theater (ART) for staging a trial run of the Broadway-bound musical "Finding Neverland," which Weinstein produced. If Weinstein didn't hit the deadline, he and his investors wouldn't recoup the money they initially gave to ART, according to the report.

What allegedly unfolded is an example of the behind-the-scenes tactics Weinstein had become known for utilizing to get his way, which resulted in an alleged cover up involving Cole that also happened to bring to light the sexual harassment and assault rumors that had been floating around Weinstein for decades.

Red flags

Red flags reportedly started flying at amfAR when executives realized that Weinstein and Cole agreed to split the proceeds on an auction item up to $1.2 million, and that half would go to amfAR and the other half would go to ART. If the auction item ended up going for more than $1.2 million, $600,000 would go to ART and the rest would go to amfAR, according to the report.

On the night of the auction, the auction item reportedly ended up going for $909,669. According to the HuffPost story, Cole and Weinstein's deal then changed in light of the item going for less than $1.2 million. Now ART would get $600,000 while amfAR would get the rest, $309,669, HuffPo reports, allowing Weinstein to pay ART enough to recoup his earlier investment.

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Harvey Weinstein at the 2016 amfAR gala.

With amfAR staff asking questions about the agreement and its changing terms, and Cole reportedly being cagey on the full details of the agreement, steps were allegedly made to not pay the money until the auction buyers had completed the experiences they paid for, according to the HuffPost story.

Meanwhile, the June 1 deadline for Weinstein was looming.

After numerous frantic emails between both parties, Weinstein reportedly wired $600,000 of his own money to amfAR, to act as a sort of insurance against any failure to pay from those participating in the auction, and in return amfAR would wire the same amount to ART on June 1. HuffPost reports that internal emails revealed that Weinstein expected to be repaid the $600,000 by amfAR.

The Huffington Post reports that amfAR executives were concerned this deal was against IRS charity rules, which state that "an individual is not entitled to unjustly enrich himself at the organization's expense."

However, Weinstein, who for years helped bring in major celebrities to amfAR fundraisers, reportedly wouldn't relent.

This reportedly led the amfAR executive committee to retain Texas trial lawyer Thomas Ajamie to independently investigate the transaction.

The first investigation

Weinstein made himself unavailable for months to Ajamie, according to the report. Ajamie concluding in his eight-page report on the matter that the deal between Weinstein and Cole "exposed amfAR to material risks to its financial integrity and reputation" and that amfAR not disclosing that some of the proceeds would be shared with ART was a "fraud on the bidders," according to the HuffPost story.

Soon after giving his report on the Weinstein transaction, Ajamie also began to get contacted by anonymous people alleging sexual misconduct from Weinstein, according to the story.

This reportedly led to both Weinstein and Cole using various tactics to bury Ajamie and his report: for Cole it was to keep the negative findings involving his approval of the transaction from spreading, while for Weinstein, it was to keep Ajamie from digging further into the sexual misconduct allegations he was beginning to hear about, according to the HuffPost story.

In the months that followed, Weinstein reportedly threatened to sue all the board members of amfAR and attempted to persuade at least one board member to vote to allow law firm Gibson, Dunn & Crutcher to investigate the amfAR-ART transaction, along with Ajamie himself. The board member reportedly didn't vote on the firm coming on, but Gibson, Dunn & Crutcher did anyway.

The second investigation

One of the firm's partners, Orin Snyder, spent the next six months attacking Ajamie and questioning his motives while seemingly protecting Weinstein and Cole, according to the HuffPost story. The additional investigation reportedly resulted in a report to the amfAR board on the amfAR-ART deal in which Snyder concluded that "this contribution was a lawful charitable donation to ART" and "any contrary suggestion is misinformed and wrong."

Snyder then allegedly took steps to get the board to sign a nondisclosure agreement on the amfAR-ART matter, HuffPost reports. When some board members refused, Snyder reportedly presented a letter from a Weinstein attorney which said he would contribute $1 million to amfAR over five years if they all signed - but only if Cole remained non-executive chairman, according to the HuffPost story.

Cole also reportedly sent an email to the board encouraging its members to sign the NDA. The email allegedly included a line that only now, after the Weinstein stories in the New York Times and The New Yorker in the past weeks, makes sense: "We are signing something that promises confidentiality and that we won't involve ourselves in Harvey's affairs in the future," Cole wrote, according to the HuffPost story.

Multiple board members have resigned since the NDA drama. According to the HuffPost story, New York Attorney General Eric Schneiderman has started an investigation into the amfAR-ART transaction and a probe into amfAR's corporate governance procedures.

Business Insider contacted The Weinstein Company and Kenneth Cole for comment but did not get an immediate response.

For the full deep dive into the scandal and the correspondences involved, head on over to The Huffington Post.