MONTREAL — The problems just keep piling up on the doorstep of Cinar Corp. The embattled Montreal-based TV producer and distributor is now in danger of being delisted from the Toronto and Nasdaq stock exchanges. In addition, Cinar CEO Barrie Usher said the company has discovered more Cinar productions that may have been penned by American authors and submitted to Canadian tax-credit authorities as shows written by Canadians.
Cinar’s current legal and financial problems began last fall when it was alleged in the House of Commons that the Montreal company had put phony Canadian names on scripts actually written by Americans in order to fulfill the Canadian-content requirements of the tax-credit rules.
The Ontario Securities Commission has issued a temporary cease-trading order on Cinar’s stock on the Toronto Stock Exchange, and there will be a hearing on the matter on June 30.
Cinar also has run into trouble with authorities at the Nasdaq exchange. The company has requested and been granted a hearing with Nasdaq to explain the delay in the filing of its annual report and financial statements for the period ended Nov. 30, 1999.
The hearing will be held in mid-July in Washington, D.C., and the decision on the de-listing of the company on Nasdaq has been delayed pending the outcome of the Washington hearing. Cinar has previously said it will likely have to re-state its past three years of financial results due to financial irregularities and issues related to misuse of the tax-credit system.
“We will convey to Nasdaq information relating to the audit by Ernst & Young, further information on the investments in the Bahamas and such other information as we feel necessary to support our case,” said Usher. “We are keenly aware that it is in the best interest of the company and its stakeholders to meet all Nasdaq’s information needs with the least possible delay.”
One of the key reasons for the slow-down in filing its financial statements is that Cinar has been unable to conclude its negotiations with Canada Customs and Revenue to settle the issue of the allegations of tax-credit fraud. Cinar and the federal tax department were close to a deal — reported to be in the range of a C$15 million ($10 million) settlement — a few weeks back but then Cinar uncovered more productions with similar tax-credit problems.
Cinar management has also confirmed that it is in discussions with a number of investment bankers and is close to selecting an investment bank to help chart the future of the firm. Cinar has discontinued its main bank credit line and, says Usher, “We anticipate negotiating new credit lines as soon as financial statements are available.”