Livent

The Live Entertainment Corporation of Canada, Inc., also known as Livent, was a theatre production company in Toronto, Ontario, begun as a division of the motion picture exhibitor Cineplex Odeon. In 1989, after an internal struggle within the company, Cineplex executives Garth Drabinsky and Myron Gottlieb negotiated to buy the division, which then included the Pantages Theatre, Toronto, and rights to Andrew Lloyd Webber's popular musical The Phantom of the Opera.

Livent joined the mix when the only competition in the major Toronto theatrical world was Mirvish Productions, which was running Les Misérables while Livent's Phantom was running.

History

Early success

In 1993 Live Entertainment Inc. went public on the Toronto Stock Exchange. The company grew quickly, becoming best known for mega-productions of such musicals as Joseph and the Amazing Technicolor Dreamcoat, Kiss of the Spider Woman, Show Boat (the highly successful 1993 revival which went to Broadway in 1994), Fosse, and Ragtime.

The company also built or refurbished several theatres (including the Oriental Theatre, Chicago), and entered into management deals with others (e.g.: Ford Centres, in Toronto, Vancouver, and New York City).

Decline, quarrels

By 1997, the company was losing money (a loss of $44.1 million that year alone), and in June, 1998, shareholders approved a deal which saw American actors' agent and ex-Disney executive Michael Ovitz take charge. Things deteriorated quickly between the company and co-founders Drabinsky and Gottlieb. The two were dismissed and escorted, under security, out of Livent's Toronto offices on August 13, 1998. Livent subsequently filed a $225 million lawsuit against them.

In August 1999, SFX Entertainment of New York, now a division of Live Nation (formerly known as Clear Channel Entertainment), acquired the bankrupt company, paying $98 million (US) for most of its assets, including the theatres and rights to all productions.

Subsequent events

Insolvency proceedings

In November 1998, Livent sought bankruptcy protection in the US and Canada, claiming a debt of $334 million.[1] The Royal Canadian Mounted Police launched a criminal investigation, and securities regulators in both Canada and the US began investigating the company's books.

In April 2014, Livent's special receiver obtained judgment against Deloitte & Touche LLP for $84,750,000 in the Ontario Superior Court of Justice, in relation to Deloitte's failure to exercise its duty of care with respect to the audit of Livent's financial statements during 1993–1998.[2] The ruling was upheld by the Ontario Court of Appeal in January 2016,[3][4] and is expected to be appealed to the Supreme Court of Canada.[5]

Criminal proceedings

In January, 1999, Livent's former chairman, Drabinsky, and president, Gottlieb were indicted in a New York court on charges they personally misappropriated $4.6 million in company funds and "cooked the books" to hide enormous losses from investors. Arrest warrants are outstanding with respect to the US criminal proceedings,[6][7][8] but double jeopardy rules prevent US extradition proceedings from taking place, because of the conviction in Canadian courts.[9]

In October 2002, Canadian police charged four former Livent senior executives with fraud affecting the public market. These charges were laid under Section 380 (1)(a) of the Criminal Code of Canada, and pertain to alleged accounting irregularities within Livent Inc. between December 14, 1989 and June 23, 1998.

On March 25, 2009, Drabinsky and Livent co-founder Myron Gottlieb were found guilty of fraud and forgery in Ontario Superior Court for misstating the company's financial statements between 1993 and 1998.[10][11] Drabinsky was sentenced to seven years in jail on Wednesday August 5, 2009 for his role in the case.[12]

Drabinsky filed an appeal in the Ontario Court of Appeal with respect to his sentence on September 3, 2009.[13] During that appeal, he remained free on bail.[14] On September 13, 2011, the Court of Appeal, while upholding the convictions, reduced Drabinsky's sentence to 5 years. The ruling was appealed to the Supreme Court of Canada, and the application was dismissed without costs on March 29, 2012.[15][16] Drabinsky was originally held at Millhaven Institution, for assessment. In December 2011, he was transferred to serve out his sentence at Beaver Creek Institution, a minimum security prison, located in Gravenhurst, Ontario,[17] and was released on day parole in February 2013. Drabinsky was granted full parole on January 20, 2014.[18]

Civil proceedings

In 2005, former investors in Livent corporate bonds won a $23.3 million settlement against Drabinsky and Gottlieb in the United States District Court for the Southern District of New York,[19] for which enforcement of the judgment was upheld by the Ontario Court of Appeal in 2008,[20] but the judgment was still unpaid in 2012.[21]

Regulatory proceedings

In January 1999, Livent reached an administrative settlement with the Securities and Exchange Commission,[22] while civil and criminal proceedings were simultaneously pursued against Drabinsky, Gottlieb and certain other former Livent employees.[23]

Administrative proceedings were initiated against Livent, Drabinsky and others by the Ontario Securities Commission in 2001,[24] and they were suspended in 2002 until all outstanding criminal proceedings had been completed.[25] In February 2013, the OSC announced that hearings would take place on March 19, 2013, in the matter.[26]

References

  1. ↑ Christopher Besant and Lydia Salvi. "The Livent CCAA/Chapter 11 Proceedings". Retrieved 2012-03-30.
  2. ↑ Drew Hasselback (April 6, 2014). "Livent auditor Deloitte ordered to pay $84.8-million for failing detect fraud". Financial Post., discussing Livent Inc v Deloitte & Touche LLP 2014 ONSC 2176 (4 April 2014)
  3. ↑ Perkel, Colin (January 8, 2016). "Court upholds $118-million award against negligent Livent auditor Deloitte". The Financial Post., discussing Livent Inc v Deloitte & Touche 2016 ONCA 11 (8 January 2016)
  4. ↑ Joseph, Patricia (January 19, 2016). "Livent v Deloitte: Has The Fat Lady Finally Sung?". thecourt.ca. Osgoode Hall Law School.
  5. ↑ Buckstein, Jeff (March 2016). "Livent ruling seen as game changer for auditing duties". The Bottom Line.
  6. ↑ Furman, Phyllis (1999-01-29). "Show Con't Go On On Lam, Livent Duo Warrant An Appearance". New York Daily News.
  7. ↑ "Warrants Issued for Ex-Livent Partners". New York Times. 1999-01-29.
  8. ↑ Austen, Ian (2006-10-23). "Fugitive Producer to Offer TV Show". New York Times.
  9. ↑ Tedesco, Theresa (2011-03-24). "Livent duo not ready to take bow". Financial Post.
  10. ↑ Janet MacFarlane and Paul Waldie (2009-03-25). "Livent founders guilty in fraud trial". The Globe and Mail. Retrieved 2009-03-25.
  11. ↑ "Ontario Superior Court of Justice Decision -- Between Her Majesty the Queen and Garth Drabinsky et al." (PDF). The Toronto Star. Retrieved 2009-03-30.
  12. ↑ French, Cameron (August 5, 2009). "Ex-Broadway mogul Drabinsky gets 7 years for fraud". Reuters.
  13. ↑ McFarland, Janet (September 4, 2009). "Drabinsky files appeal of jail sentence". The Globe and Mail.
  14. ↑ Tedesco, Theresa (2011-04-26). "Drabinsky, Gottlieb get another day in court". Financial Post.
  15. ↑ "SUPREME COURT OF CANADA -- JUDGMENTS IN LEAVE APPLICATIONS". 2012-03-29.
  16. ↑ McFarland, Janet (2012-03-29). "Drabinsky loses appeal bid". The Globe and Mail.
  17. ↑ Knelman, Martin (2011-12-29). "Garth Drabinsky transferred to Beaver Creek minimum security prison". Toronto Star.
  18. ↑ http://www.cbc.ca/m/news/#!/content/1.2503906
  19. ↑ McKinley, Jesse (2005-02-09). "Executives Must Pay $23.3 Million to Broadway Investors, Judge Says". New York Times.
  20. ↑ King v. Drabinsky 2008 ONCA 566, 91 OR (3d) 616, 295 DLR (4th) 727 (28 July 2008)
  21. ↑ McFarland, Janet; Malone, Paul (2012-08-23). "Livent moguls guilty after lengthy drama". Globe and Mail.
  22. ↑ "ADMINISTRATIVE PROCEEDING - File No. 3-9806". Securities and Exchange Commission. 1999-01-13. Retrieved 2012-03-30.
  23. ↑ "Litigation Release No. 16022". Securities and Exchange Commission. 1999-01-13. Retrieved 2012-03-30.
  24. ↑ "STATEMENT OF ALLEGATIONS OF STAFF OF THE ONTARIO SECURITIES COMMISSION". Ontario Securities Commission. 2001-07-03. Retrieved 2012-03-30.
  25. ↑ "ORDER" (PDF). Ontario Securities Commission. 2002-11-15. Retrieved 2012-03-30.
  26. ↑ Schecter, Barbara (2013-02-21). "Curtain to rise again for Livent at OSC". Financial Post.

External links

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