TORONTO - Two theatre heavyweights who defrauded investors by systematically cooking the books for years at Livent Inc. were each sentenced to several years in prison Wednesday by an Ontario judge keen to denounce the dangers of corporate fraud.

Garth Drabinsky was sentenced to seven years in prison and his business partner Myron Gottlieb was sentenced to six years.

They were granted bail of $350,000 each pending appeal and were free Wednesday afternoon. Drabinsky and Gottlieb must surrender their passports and not act as the director of any company.

The two moguls manipulated the income reported on the financial statements of their company Livent, behind such Canadian and Broadway theatre hits as "The Phantom of the Opera," over nine years until the firm went bankrupt in late 1998.

Ontario Superior Court Justice Mary Lou Benotto said the contributions Drabinsky, 63, and Gottlieb, 66, made to society must be taken into account.

"But no one is above the law," she said. "No one gets to write his own rules."

The pair presided over a company "whose corporate culture was one of dishonesty," which Benotto said the court has a duty to strongly denounce.

"Corporate fraud such as this results in tangible losses to employees, creditors and investors," Benotto said in her decision.

"It also results in less tangible, but equally significant loss to society. It fosters cynicism. It erodes public confidence in financial markets."

Drabinsky and Gottlieb devised a kickback scheme that saw assets of Livent and its predecessor company overstated in financial statements. They would arbitrarily move operating expenses from one period to another and apply the expenses of one show to another.

The duo was convicted of two counts each of fraud and one count of forgery, but Benotto stayed the forgery convictions Wednesday, saying the facts were the same as one of the fraud counts.

Drabinsky was sentenced to four years on one fraud charge and seven years on the second, to be served concurrently. Gottlieb was handed four years on the first count of fraud, and six years on the second, also to be served concurrently.

Gottlieb was primarily responsible for Livent's finances, but Benotto said Drabinsky was "the main person in charge," and that Gottlieb was "caught in a wide net that was most likely meant for Mr. Drabinsky."

Edward Greenspan, Drabinsky's lawyer, and Brian Greenspan, Gottlieb's lawyer, both had little to say outside court except that appeals are in the works.

Both men have filed notices of appeal for their convictions and will file a notice of appeal on the sentences within 30 days, their lawyers said.

The grounds of appeal on the convictions largely take issue with how Benotto assessed the credibility and reliability of key Crown witnesses.

At sentencing Benotto said while the men have contributed to society and charities and have no criminal records, she must take into account the ongoing breach of public trust.

"When the company collapsed, people lost their jobs, creditors lost their money and investors lost share value," she said.

While the exact dollar value of the fraud is not known, the investments made in the public company were more than $500 million.

The men had pleaded not guilty to all charges, arguing that underlings had cooked the books without their knowledge.

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