For Drabinsky, Gottlieb and Livent’s investors, the waiting is finally over.
Conrad Black’s criminal fraud trail was dubbed “The Trial of the Century,” by many of the reporters who covered it. So what can we make of the trail of Garth Drabinsky and his longtime partner Myron Gottlieb whose fraud trial begins on Monday? The pair face three fraud charges that stem from the collapse of Livent Inc., the live theatre company that — at the time — was known for musical productions like Phantom of the Operaand Ragtime. Today, those that remember Livent, associate the name with allegations of fraud and financial chicanery.
The company imploded nearly 10 years ago, wiping out more than $250 million in shareholder value. Drabinsky and Gottlieb are accused of cooking Livent’s books by using allegedly bogus transactions to hide losses and create phantom profits; using kickback schemes to divert company revenues into their own pockets and even using secret accounting software to fool company auditors, stock analysts, shareholders and regulators.
Both men have maintained their innocence from the start. Their defence: Livent’s accounting staff committed the alleged fraud without their knowledge or consent. Drabinsky and Gottlieb’s lawyers — Eddie Greenspan represents the former and his brother Brian represents the latter — will get a chance to make their case soon enough when four of Livent’s senior accountants testify in the case. All four have already pled guilty to either criminal or regulatory violations in either Canada or the U.S.
Those courtroom confrontations may end up looking a lot like the highly publicized cross examination of David Radler, Conrad Black’s longtime partner who agreed to testify against Black as part of a plea bargain with U.S. prosecutors and securities regulators. That’s not the only connection between Black and Drabinsky. Black was a member of Livent’s board of directors and an outspoken defender of Drabinsky when the original fraud allegations surfaced.
Ultimately, the Black trial gave investors some insight into the inner workings of Hollinger and an understanding of how the once-mighty Conrad Black could have fallen so far into disgrace. Livent investors have already had to wait nearly a decade for some sort of similar understanding, and they will have to wait until the trial wraps up to see if Drabinsky and Gottlieb will suffer the same fate as Black. Canadian investors will have to wait to see if the trial does anything to alter our lackluster international reputation as a place where financial fraud goes largely unpunished.