Livent Co-Founders Found Guilty

Two co-founders of a Broadway theater company that produced hit shows such as “Ragtime” and “Showboat” were convicted Wednesday of accounting fraud for overstating their business’ finances by millions of dollars for several years.

Garth Drabinsky and Myron Gottlieb, co-founders of Livent, a major Broadway theater company in the 1990s, were convicted of two counts of fraud and one count of forgery. They each face a maximum of 14 years in prison.

In the 85-page ruling, the judge said the Tony award-winning producers knowingly submitted financial statements to investors misrepresenting their company’s circumstances from 1994 to 1998.

The Toronto-based company filed for bankruptcy protection in 1998 after the fraud was revealed when former Walt Disney Co. President Michael Ovitz invested in Livent.

Authorities said the cooked books helped build $100 million in shareholder value that was lost when the fraud was revealed by the new management team headed by Ovitz.

Drabinsky, 59, and Gottlieb, 65, were fired and Livent filed for bankruptcy protection. The two were indicted in the U.S. in 1999 on charges that they had misappropriated millions of dollars from U.S. investors. In 2002, Canadian authorities charged the two, alleging that investors and lending institutions were duped into providing more than $400 million to Livent.

“You performed wonders for the entertainment industry, for the arts, for the tourist industry and for all of those who simply enjoy live theater,” Ontario Superior Court Justice Mary Lou Benotto told the two in court.

“The trial, however, was not about that. The trial was not about the success of Livent. The trial was about the accounting practices of Livent,” Benotto said.

Defense lawyer Eddie Greenspan declined to comment Wednesday and Drabinsky said nothing as he left court. Drabinsky hung his head immediately after the verdict and his family members wept.

“It’s been an 11-year struggle, so it takes a little time to react,” David Roebuck, one of Drabinsky’s lawyers, said.

The defense argued that Drabinsky and Gottlieb didn’t know about the accounting manipulations, and that employees who testified against them did so to minimize their own sentences.

Drabinsky and Gottlieb still face charges in the U.S.

Livent was once the largest live theater company in North America. It once owned or controlled theaters in New York, Chicago, Toronto and Vancouver and its Broadway productions have won 14 Tony Awards and have been nominated for dozens more.