Drabinsky, Gottlieb charged with fraud in Livent case

The RCMP charged Garth Drabinsky and Myron Gottlieb, the co-founders of the once high-flying theatre company Livent, with 19 counts each of fraud following a four-year investigation into the business's books.

• BACKGROUNDER: Livent timeline

"We are alleging that the accused defrauded creditors and private and public investors of approximately one-half a billion dollars between Dec. 14, 1989, and June 23, 1998," RCMP Detective Inspector Craig Hannaford of the commercial crime unit told reporters during a news conference in Toronto.

"In addition, we estimate that approximately $210 million in market capitalization was lost between the time the trading of Livent shares halted on Aug. 10, 1998, and when trading resumed on Nov. 19, 1998," Hannaford said.

Drabinsky and Gottlieb both face charges of fraud over $5,000. Gordon Eckstein, Livent's former vice-president of finance, faces 18 counts of fraud, while Robert Topol, the company's former chief operating officer, is accused of 13 counts of fraud.

"Those that defraud the public must be held accountable for their actions," Hannaford said.

The accused surrendered to authorities on Tuesday morning and were freed on bail.

Drabinsky's lawyer Edward Greenspan said his client will plead not guilty to the charges.

The penalty for fraud in this case is up to 10 years in prison, Hannaford said.

Livent was born in 1990, formed by Drabinksy and Gottlieb. The company eventually grew to own theatres in Toronto, Vancouver, New York and Chicago. The company also won critical acclaim for its productions, including Show Boat, Ragtime and Phantom of the Opera, and garnered 19 Tony Awards.

But the company sought bankruptcy protection in both Canada and the United States in November of 1998. The company's new management a team headed by former Walt Disney executive Michael Ovitz subsequently fired Drabinsky and Gottlieb, saying they "fraudulently manipulated" financial records to hide losses of $100 million.

As well as the criminal charges, Drabinsky and Gottlieb face a $225-million lawsuit filed by Livent.

Drabinsky and Gottlieb fired back with a $210-million lawsuit of their own, denying any wrongdoing. Their countersuit alleges Livent's new management conspired against them by trying to discredit their reputations.

Drabinsky and Gottlieb already face 16 counts of fraud and insider trading in the United States that were laid in January 1999.

The pair also face an investigation by the Ontario Securities Commission. The OSC alleged in July of 2001 that Livent issued "misleading or untrue statements" in its financial reports. The next hearing in the long-running and often-delayed case is set for November 1.

Drabinsky has maintained a relatively low profile since Livent crumbled. But he resurfaced this year when the Toronto Argonauts football team hired him as a marketing consultant to bring in pre-game and halftime entertainment. The charges against Drabinsky come just two days after he organized a half-time show that brought Muhammad Ali to Toronto to raise money to combat Parkinson's disease.