Corporate Governance

Livent?s Last Act

By Fei-Lu Qian

As reported in the NY Times, this week in the Ontario Superior Court, Garth H. Drabinsky, the former chief executive of the defunct Broadway production company Livent and his business partner Myron I. Gottlieb were convicted of forgery and defrauding shareholders of about 500 million Canadian dollars, or more than $400 million.

The judge flatly rejected the defendants? arguments that ?the company?s financial manipulations and its inflated box office receipts were a complex conspiracy by Livent employees.? Simply put, the judge said that Livent?s ?accounting system was fraudulent? where there were ?two sets of books: one a loss-plagued but accurate accounting, the other a fiction to impress investors and bankers and boost its stock price.? For example, instead of recording a loss of 41 million Canadian dollars, the Company recorded a profit of 14 million Canadian dollars. The Company routinely inflated its financial results by a complex process that deleted costs off its books.

In the words of the judge: ?The exponential growth of the company was analogous to an athlete taking a performance-enhancing drug. The result may be spectacular, but the means involve cheating.?

Full post as published by PomTalk on March 27, 2009 (boomark / email).