Blogs & Comment

Livent Founders Ordered to Pay US$36.6 million

While the criminal fraud proceedings against Garth Drabinsky and Myron Gottlieb have taken a short break this week, the pair were dealt a major blow, earlier today, in their civil litigation with Livent investors. The Ontario Court of Appeal has upheld a lower court ruling ordering the pair to pay more than US$36.6 million to investors who were allegedly defrauded by the Livent founders.
The court rejected Drabinsky and Gottliebs argument that a judgment handed down by a U.S. court should be overturned because they could not travel to the U.S. to defend themselves without risking arrest from American authorities. Since the appellants chose to do business and file a registration statement with the U.S. authorities, it is hardly unfair or disorderly to recognize the resulting civil judgment arising from their misrepresentations in this statement, wrote Appeal Court Justice Susan Lang on behalf of the panel.
The case stems from a 2005 judgment by a New York judge who ordered Drabinsky and Gottlieb to pay US$23 million plus interest (now totaling US$36.6 million) to holders of Livents investment notes who lost money when the company collapsed in 1998. U.S. courts ruled against an appeal of that decision as well as a subsequent motion filed by Drabinsky and Gottlieb citing evidence from the preliminary hearing in the criminal fraud case they say showed that others at Livent had committed the alleged fraud without their knowledge or approval. Last year an Ontario court ruled that the original New York judgment could be enforced in Canada.
Neither Drabinsky nor Gottlieb testified during the original U.S. civil trial, citing their right to remain silent. Instead, the pair relied upon depositions, documentary evidence and an affidavit from Robert Topol, Livents former chief operating officer, in an effort to convince the judge they had performed adequate due diligence on Livents allegedly fraudulent financial statements. None of which particularly impressed the original U.S. judge.
Ironically, the appeal was heard on May 5th the same day as the start of Drabinsky and Gottliebs criminal fraud trial.
In another cruel twist, George Glezos, one of the lawyers representing the Livent noteholders died suddenly on July 20 just eight days before the ruling came down. Glezos, 53, was a well-known and respected Toronto securities lawyer who represented shareholders in a number of high-profile lawsuits.
The criminal trial resumes August 11th.