Charges hit Livent duo
Drabinsky, Gottlieb facing the fraud music in Canada
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The charges come after a four-year probe by the Royal Canadian Mounted Police, one of the largest in the org's history.
"We are alleging that the accused perpetrated this fraud by falsifying the corporate financial statements and therefore misrepresenting the financial health of their company," RCMP detective inspector Craig Hannaford of the white-collar crime division told reporters at a packed press conference in Toronto.
Also charged are former Livent VP of finance Gordon Eckstein, with 18 counts of fraud, and former Livent chief operating officer Robert Topol, 13 counts. The maximum sentence is 10 years in prison, plus there is a provision in Canada's criminal code for financial restitution.
All four surrendered to police Tuesday morning, appearing several hours later in a provincial court for a bail hearing. All were granted bail.
Michael Ovitz and New York investment banker Roy Furman paid $20 million for control of Livent in April 1998, bailing out what they believed was a promising but troubled company.
By August, the new management reported "serious irregularities" in Livent's financial records. Drabinsky and Gottlieb were fired, and the company filed for Chapter 11 in the U.S. and for bankruptcy protection in Canada in November of that year. Livent's assets were sold in the fall of 1999.
There have been a flurry of private lawsuits and countersuits filed by Ovitz, Drabinsky, Gottlieb, various accounting firms and Livent.
Criminal indictments were issued in the U.S. in 1999, when the attorney's office in the Southern District of Manhattan charged Drabinsky and Gottlieb with 16 counts of conspiracy and fraud that authorities there claim were perpetrated to conceal tens of millions of dollars in losses. They have refused to travel to the U.S. to face charges and a warrant has been issued for their arrest.
Hannaford said the RCMP's investigation took longer than the U.S. probe due to its greater scope and complexity, and differences between the Canadian and U.S. criminal process. Some 15 officers interviewed more than 120 people in Canada and the U.S., and examined more than 2,000 boxes of legal documents.
A parallel investigation by the Ontario Securities Commission into the business conduct of the four over three years starting in 1996 is likely to be shelved, based on past practices of the OSC, pending the outcome of the RCMP probe. Observers say that due to the complexity and the profile of the case, it's likely to take years. The next court hearing is scheduled to take place Dec 3.
Drabinsky and Gottlieb are represented, respectively, by brothers Eddie and Brian Greenspan, two of Canada's top criminal lawyers.
"Mr. Drabinsky has consistently said he welcomes the chance to clear his reputation," said a statement from his lawyer, Eddie Greenspan. "Our courts are a place where the presumption of innocence is not a Hollywood catchphrase but a place where evidence, facts, and truth prevail."
"(Myron Gottlieb) is confident that he will be treated fairly by the Canadian justice system," said a statement from Brian Greenspan's office. "He looks forward both to the opportunity to present his response to these allegations and to his complete vindication when these proceedings have been concluded."
The charges come just days after Drabinsky brought boxing legend Muhammad Ali to the Toronto Skydome to appear before fans of his employer, the Toronto Argonauts Football Club, to help raise research funds for Parkinson's disease.
Since being dismissed by Livent, Drabinsky has brought South African playwright Arthol Fugard's "The Island" to Toronto, worked as a marketing consultant for the National Post Newspaper and created a series of Cultural Weekends in the Muskoka district.
