MONTREAL — Embattled Canuck TV producer Cinar Corp. has been hit with a tough new ruling by Canadian regulatory authorities.
The Quebec Securities Commission has ordered a trading halt on Cinar’s stock and has rejected the Montreal-based children’s TV company’s request for additional time to prepare its 1999 financial statements. With the ruling, Cinar cannot begin trading again until the Quebec Securities Commission lifts the ban. Even if the Nasdaq exchange, for example, was to lift its halt-trading ruling, the Quebec regulator could still stop Cinar from trading on the U.S. exchange.
Cinar shares have not been trading on the Toronto Stock Exchange or Nasdaq since March 8. In addition, the Canadian regulator has insisted that Cinar put out a press release every 15 days to update investors on its efforts to restate its financial results. Cinar, which has not been the source of much detailed information since the financial scandal broke March 6, issued a press release Thursday at the request of the Securities Commission, giving a status report on its internal audit.
“We are keenly aware that our shareholders are anxious to receive accurate financial information on the company,” Cinar CEO Barrie Usher said. “We have taken special measures to produce statements as quickly as possible.”
Cinar had until April 18 to file its consolidated financial results for last year and had asked to be given an extra 90 days to deliver the information to regulators. The request was turned down. Cinar management said they will attempt to file audited financial statements by June 30, but it still cannot guarantee making that deadline.
Cinar confirmed Thursday that it “appears likely” that it will have to restate its financial results for 1997 and 1998 and for the first three quarters of 1999 for “reasons relating to tax incentives and the disclosure of related party transactions.” Cinar execs cannot accurately assess the amount of the financial hit because it will depend on the amount of tax incentives that have to be paid back to the government, the outcome of the review related to the previously disclosed missing $122 million, and to the effect of related party transactions.
Last month, Cinar founders Ronald Weinberg and Micheline Charest ankled the company and former senior executive vice president Hasanain Panju was fired in the wake of revelations that $122 million was funneled into risky offshore investments without board approval. The unauthorized investments came to light as the result of an internal audit began last fall following allegations in the House of Commons that Cinar was engaged in defrauding the film tax-credit system in Canada.
The Royal Canadian Mounted Police continues to investigate the tax-fraud allegations at Cinar, and earlier this week the Mounties filed court documents alleging that the company obtained at least C$7.8 million ($5.4 million) in Quebec provincial tax-credits via fraudulent activity.
In its release Thursday, the most detailed disclosure yet from Cinar, the company said it has retained the services of PricewaterhouseCoopers to provide financial advisory services and to assist management in the work required to prepare the financial records of the company. Cinar execs also said they will comply with the regulators’ decision and communicate by news release every 15 days on the status of its financial review.
“The Commission’s decision is consistent with regulatory proposals made public in March 2000 and we intend to comply with the terms,” Cinar topper Usher said.