Livent co-founders to appeal convictions

Two theatre moguls handed prison terms for a scheme to cook the books at Livent Inc. are taking a bid to overturn their guilty verdicts to Ontario's highest court, arguing the trial judge didn't understand critical evidence.

Garth Drabinsky and Myron Gottlieb were convicted in 2009 of two counts each of fraud after judge Mary Lou Benotto found they manipulated the income reported on the financial statements of their company Livent, behind such Canadian and Broadway theatre hits as The Phantom of the Opera, over nine years until the firm went bankrupt in late 1998.

Drabinsky, described as the man in charge, received a sentence of seven years. Gottlieb, who was primarily responsible for the finances, but who Benotto said was caught in a wide net likely meant for Drabinsky, was sentenced to six years.

But while Gottlieb is asking the Court of Appeal for Ontario for a new trial, or at least a reduced sentence, Drabinsky is seeking an outright acquittal. Failing that, he is asking for either a new trial or a conditional sentence.

The two have already stayed out of prison since being convicted, due to speedy paperwork by their lawyers, brothers Edward and Brian Greenspan. The same day they were sentenced Drabinsky and Gottlieb were granted bail of $350,000 each pending appeal.

Defence disputes judge's evaluation of evidence

The theatre heavyweights argued at trial, and continue to argue on appeal, that some of their accounting staff perpetrated the fraud without their knowledge. In documents filed with the Appeal Court in advance of their three-day hearing, set to start Monday, they suggest Benotto used faulty reasoning to convict them, including presuming that the pair must have known about the fraud to support a conclusion they did in fact know about it.

"She did not properly apprehend the evidence or the significance of it," Edward Greenspan wrote for Drabinsky.

"When the undisputed facts are properly and reasonably assessed without misapprehension, they are completely inconsistent with the conclusion that the Appellant had knowledge of or directed any fraud."

Gottlieb further argues that the judge failed to separately evaluate the evidence against himself and Drabinsky.

"[Benotto] imputed knowledge to the appellant Gottlieb simply by virtue of the fact that she had concluded that Drabinsky had been aware of the manipulations," Brian Greenspan writes.

He also notes that the defence took great issue with Crown witness credibility at trial.

"The prosecution's reliance on unsavoury, disreputable, self-interested and discredited witnesses had not established the appellant Gottlieb's awareness and participation in the accounting improprieties which took place at the direction and under the supervision of [senior accountant Gordon] Eckstein and with the complicity of the employee witnesses," he writes.

Drabinsky's and Gottlieb's arguments are met with great skepticism from the Crown. The pair are putting forward the same "tenuous position" they unsuccessfully argued at trial, Crown lawyers write in court documents.

"Namely, that they, two sophisticated and experienced corporate executives who owned and operated in a very hands-on way a multi-million dollar business that attracted investments from the public of over $500 million, were completely unaware that subordinate employees within their company were committing a massive fraud on the public for more than five years," the Crown argues.

"The position of the appellants defies common sense and contradicts the lessons of human experience."

While the exact dollar value of the fraud is not known, the investments made in the public company were more than $500 million.

Benotto found that Drabinsky and Gottlieb devised a kickback scheme dating back to 1989 that saw assets of Livent and its predecessor company overstated in financial statements. They would arbitrarily move operating expenses from one period to another and apply the expenses of one show to another, she found.