Over the past six months, prosecutors in the criminal fraud trial of Livent founders Garth Drabinsky and Myron Gottlieb have spent most of their time examining witnesses about the volumes of documentary evidence at the heart of the case. Most of the documents are dry financial statements; often inscrutable printouts from the company?s computerized general ledger and memos or summaries of what prosecutors say are improper accounting transactions.
But among the financial statement, corporate memos and other financial documents included in the prosecutors final submissions filed with the court earlier this week was one last document that was not dry and didnt have anything to do with accounting: it was a deeply personal letter from Garth Drabinsky to Karen Poppell his then girlfriend detailing problems in their relationship.
In the handwritten and undated 10-page letter, Drabinsky writes about an impossible level of personal debt that had strangled him for the last five years and goes on to state how complex it would be to eliminate that debt. According to prosecutors, that discussion about the level of Drabinskys debt provides a motive in the fraud case against the former Livent executive. Drabinsky and Gottlieb had pledged their Livent shares to cover loans and debt, which translated into a pressing need to keep the stock price up, prosecutors say.
The letter, which was not discussed during the trial, could very well describe a motive for why the executive would want to boost Livents share price. It also provides a unique and unfiltered look into Drabinsky’s personality and his concerns in Drabinsky’s own words prior to the revelations of alleged accounting improprieties at the theatre company. This has been lacking in the trial since neither Drabinsky nor Gottlieb chose to testify on their own behalf or offer any of their own witnesses.
The revelations in the letter could also provide an explanation for why Drabinsky moved to sell a controlling stake in the company to former Hollywood mogul Michael Ovitz in early1998. Was that US$20 million Ovitz transaction what Drabinsky was referring to when he wrote to Poppell: After a wonderful Christmas we entered the year buoyed up with a new confidence that in February my financing would close, you would move to Toronto(and) by the end of March I would be out of my marriage.
During his time with Poppell, Drabinsky writes that he was involved in a huge personal transformation in my lifestyle to rid himself of his mounting debt. He adds that he had begun to investigate every conceivable avenue to liquidate enough of my asset base to free me of this suffering position.
Drabinsky did not tell Poppell about that debt at the outset of their relationship. He eventually came clean and set timelines for when he would be out from under the debt. Drabinsky thought he would be able to meet those deadlines, but ultimately, he failed. This was done because of my sense of optimism and confidence; that if I am determined I will not fail I am not a gay deceiver, but I am too much of an optimist, I over-evaluate. I have learned my limits. The task was simply much larger than I appreciated.
The crown introduced no evidence of this debt during its case and very little evidence about Drabinsky or Gottlieb’s personal finances in the final year of the company. The court heard brief testimony about the amount of Livent stock that Drabinsky and Gottlieb owned, how many stock options they were granted, the size of their annual compensation and bonuses.
The crown also introduced several statements of net worth that the executives had to provide to financial institutions as part of loans they took out in association with the takeover of Livent. For instance in 1990, Drabinsky reported to the Royal Bank that he had a net worth of $26.1 million. That included a personal art collection valued at $16.275 million; a $4 million home on Strathearn Rd in Toronto, a 50% interest in an ocean-front property in Antigua valued at $315,000; a chalet in Sundance, Utah the home of the Sundance film festival, as well as $1.6 million in other real estate. Drabinsky valued his stake in Livent at $12.5 million. Those assets were offset by $11.5 million in loans to the Bank of Nova Scotia, Israel Discount Bank and Roy-l Capital, a private firm run by prominent Toronto businessman and philanthropist, Joseph Rotman.
By 1998, Drabinskys net worth had increased, but not without liquidating assets. According to documents Drabinsky provided to Brascan in association with another loan, his net worth had grown to $39 million. However, Drabinskys personal art collection was now worth about $7.9 million, the Utah chalet has been sold and the value of the house on Strathearn Rd was now listed at $3.25 million. The bulk of Drabinskys net worth — $30.8 million — was tied up in 2.1 million Livent shares that were trading at about $14.25 each. The value of Drabinskys outstanding loans has also dropped by that time, with the executive owing about $4.5 million to The Royal Bank, CIBC and Waterloo Capital Corp.
According to his net worth statement presented in court, Gottlieb had assets of about $33 million in 1991, offset by about $7 million in loans and other liabilities giving the Livent founder a net worth of about $26 million. As part of a lawsuit filed against the law firm of Stikeman and Elliot last year, Gottlieb says he has been all but wiped out financially.
While there has been little testimony during the trial about the personal financial situation of Drabinsky and Gottlieb, this is not the first time Drabinskys girlfriend has made an appearance in court testimony. Gordon Eckstein, Livents former senior vice president of finance and administration, testified that Poppell was Drabinskys “mistress” during a dramatic testimony early in the trial.
The testy exchange came after Edward Greenspan, the lawyer representing Drabinsky, confronted Eckstein with a photograph of Drabinsky, Poppell and then-president Bill Clinton taken during a Ragtime themed lunch in Washington D.C. organized by the U.S. Democratic Party in April 1998. The photo was taken on the same day Eckstein and Chris Craib, a Livent controller, testified Drabinsky was in Toronto attending a management meeting where accounting manipulations were allegedly discussed. The defence insists that the meeting never took place and – while Drabinsky did in fact return to the office later that day – the photo proves Drabinsky could not have attended the meeting when the witnesses say it occurred.
Greenspan disagreed with Ecksteins characterization of Poppell as Drabinskys mistress, insisting that Drabinsky was separated from his wife, Pearl, at the time the photograph was taken. That may be the case, Eckstein replied, but Drabinsky was still married when he began seeing the woman. Poppell had been the subject of much talk in the office since Drabinsky had allowed the woman to live in one of Livents company apartments and had the company pay to redecorate the apartment to suit her tastes, Eckstein continued.
Drabinskys letter shows confirms that he had in fact been seeing Poppell while still married. The fact that Drabinsky seemed reluctant to leave his wife appeared to have been a sore spot in their relationship, according to the letter. Another source of disagreement was Drabinskys refusal to introduce Poppell to his dying mother as well as Poppells refusal to read Drabinskys autobiography. My book, over which I labored for four years before I met you, became a major source of acrimony. You refused to read my life story. No matter what excuse you gave me, they were all feeble. There can be no excuse for not reading the story of the one you profess love for. This book meant too much to me. You shunned it and you shunned me.
Drabinsky eventually did leave his his wife of 27-years, but problems persisted in the relationship. Who is this Karen Poppell? Drabinsky writes. Poppell appears to also have been upset that Drabinsky did not make their relationship public during the televised broadcast of the Tony Awards in New York. At one point Poppell fled Drabinskys car in the middle of traffic during an argument. Drabinsky complains that she grew upset over improper place cards at the table, and improper forms (were) completed by my pilots on the corporate jet Livent purchased in April 1998.
The couples relationship was not always so tense. Drabinsky describes in heartfelt detail the joy he felt in the early part of their relationship when they travelled to the United States, the Caribbean and Israel where maybe we reached the essence of a true spiritual and emotional union, Drabinsky wrote.
Despite all the acrimony, Drabinsky still professed his love for Poppell and ends the letter with hope the couple can still experience a full and wonderful life together. However, the two didnt make it and eventually split. In 2005, Drabinsky married Elizabeth Winford, a former paralegal with Tremayne-Lloyd Partners who has attended much of the trial. The couple married in a private ceremony held at the Four Season hotel attended by celebrities such as Christopher Plummer, acclaimed Broadway director Hal Prince, Chita Rivera and former CTV broadcaster and Canadas consel general to New York City, Pamela Wallin. Edward Greenspan and his brother Brian who is representing Gottlieb, also attended the ceremony.
Drabinskys relationship with Poppell is history. Today, there is another woman the theatre impresario is trying to woo Justice Mary Lou Benotto, the judge overseeing the case. Benotto is expected to deliver her decision on Drabinskys fate sometime in the new year.
Next week defence lawyers file their own final summation in the case. In the coming days, I will post a more extensive examination of the prosecutions summation of the case.