Home
 
Choose Your City
Change City

Theatre moguls Drabinsky, Gottlieb guilty in $500M Livent fraud

The spectacular fall of two of Canada's highest-flying theatre impresarios ended with an emphatic thud

TORONTO - The spectacular fall of two of Canada's highest-flying theatre impresarios ended with an emphatic thud Wednesday as Livent Inc. co-founders Garth Drabinsky and Myron Gottlieb were found guilty of cooking their company's books and defrauding investors of millions.

As family members wept, the grim-faced men, whose Broadway and Canadian productions of "Kiss of the Spider Woman," "The Phantom of the Opera" and "Show Boat" thrilled audiences across the continent, left court in silence.

Ontario Superior Court Justice Mary Lou Benotto delivered a brief oral judgment by starting with some high praise for the two men before pronouncing a guilty verdict to a standing-room-only courtroom.

"The creative success that you achieved through your company was spectacular," Benotto said. "It performed wonders."

While the well-deserved success and honours the men achieved "reflected favourably" on all Canadians, Benotto continued, the trial was about the company's dishonest accounting practices, not about its theatrical successes.

"The accounting system was fraudulent," she said, before pronouncing the duo guilty. "You knew what was happening."

Drabinsky, 59, who was named to the Order of Canada, and his business partner, Gottlieb, 65, deliberately misrepresented their company's finances before it went public in the early 1990s.

They then "systematically manipulated" the books to outwardly increase profits, Benotto said.

She compared Livent's growth to "an athlete taking a performance-enhancing drug" that might lead to fantastic results but which nevertheless "involves cheating."

The convictions on two counts each of fraud and one of forgery carry respective maximum sentences of 10 and 14 years. The men, who have not been in custody, will appear in court April 8 to begin the sentencing process.

The pair were represented by the legal "dream team" duo of brothers Edward and Brian Greenspan, who said they would only comment after reading Benotto's 80-page-plus written decision.

"We have not read it and we need an opportunity to review it carefully," said Edward Greenspan, who defended Drabinsky.

"We have to do that before we can make any comment."

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

During 62 days of hearings that began last May and created 7,000 pages of witness testimony, the Crown argued the sustained fraud that occurred through the 1990s could not have happened without their knowledge and direction.

Investors and lending institutions were duped into providing more than $500 million to Livent, prosecutors said.

In its heyday, the entertainment company was a darling of North America's theatre industry with its series of popular hits and had put on productions in London and Australia.

The co-founders lived glamorous lifestyles, even as financial statements were changed to create a gloss of financial success.

The long-running scheme unravelled when a group led by Hollywood mogul Mike Ovitz took over the floundering company in 1998.

At trial, Drabinsky and Gottlieb attempted to blame their former vice-president of finance, Gord Eckstein, and other senior executives for the scam.

In her judgment, Benotto called Eckstein an arrogant and "unsavoury witness" who would have been "the perfect fall guy" but said she believed he told the truth, at least in "some respects," when he testified against his ex-bosses.

In any event, she said, the buck stopped with Drabinsky and Gottlieb.

"(They) were so devoted to the continuation of Livent that they directed the falsification of the financial statements in order to continue the flow of money to the company," Benotto found.

"They were deceitful, they perpetrated a falsehood, and reasonable people would consider them dishonest."

Len Brooks, a professor of accounting and business ethics at the University of Toronto, said the fraud clouded the men's brilliant theatre achievements.

"There is no doubt that their contribution to the theatre scene has been impressive, but regrettably they were using other people's money to make these contributions," Brooks said.

"The problem obviously wasn't their theatre sense; it was their integrity in dealing with the financial resources they had and the reporting and disclosures that they made."

A representative of a Livent creditor group, who asked not to be named, said creditors might now receive additional payouts.

Last month, the Supreme Court of Canada refused the duo's request to stop a US$36-million, class-action judgment from being enforced against them in Canada.

Also, the U.S. Attorney's Office in Manhattan indicted them in 1999 on fraud and conspiracy charges, which are pending.

The Ontario Securities Commission has also filed charges against Drabinsky and other executives.

 
 
Consider AlsoFurther Articles