Broadway producers convicted of fraud

TORONTO — Former Broadway producers Garth Drabinsky and Myron Gottlieb, founders of the once-thriving theater company Livent, were both found guilty of two counts of fraud and one count of forgery in a Toronto courtroom on Wednesday.

It marked a decidedly downbeat final curtain for the flamboyant showman Drabinsky, who, at his height, dazzled Broadway with free-spending ways the likes of which hadn’t been seen since Florenz Ziegfeld.

Drabinsky’s 1994 production of “Show Boat” was cited at the time as the most expensive musical in Broadway history, and he was also known for his private jets, his extravagant opening parties and for wooing stars with champagne and limousines.

The Ontario court ruled that Drabinsky and Gottlieb funded this lavishness by tampering with financial statements to boost the company’s asset value and share price, defrauding investors of $500 million between 1993 and 1998.

The judgment was delivered by Ontario Superior Court Justice Mary Lou Benotto 11 months after the trial began. Defense lawyers will respond to the verdict on April 8; a date for sentencing has yet to be set. The fraud charges carry a maximum of 14 years in prison, the forgery charge a term of 10 years.

In delivering the verdict, Benotto began by praising Drabinsky and Gottlieb, saying, “The creative success that you achieved due to your company was spectacular.” But she went on to accuse the men of having perpetrated “widespread and long-standing fraud.”

Drabinsky and Gottlieb founded Livent in 1989. They parlayed a single Toronto theater, the Pantages, which was then running “The Phantom of the Opera,” into a legit powerhouse that extended to theaters in New York, Chicago and Vancouver.

Their Broadway productions included “Kiss of the Spider Woman,” “Show Boat,” “Ragtime” and “Fosse.” Livent shows were nominated for 61 Tony Awards and won 19.

Drabinsky also kept productions like his revival of “Joseph and the Amazing Technicolor Dreamcoat,” starring Donny Osmond, touring nonstop across North America, generating seemingly endless revenue.

But it all started to go wrong in the late 1990s, when Drabinsky miscalculated badly and delayed the New York opening of “Ragtime” for more than a year in order to further tinker with the show in Los Angeles. This allowed “The Lion King” to swoop into town first, garner the hit reviews and grab the all-important Tony for best musical.

Shortly thereafter, the organization’s practice of using revenue from one show to pay for the expenses of another suddenly collapsed.

In April 1998, a team led by Michael Ovitz and New York entertainment financier Roy Furman paid $22 million for a controlling stake in Livent and installed their own management.

Ovitz quickly uncovered the fraud, and, by August 1998, Drabinsky and Gottlieb were dismissed. They were marched out of their offices at dawn by security guards following the opening night of Drabinsky’s final show, “Fosse.”

Livent sought bankruptcy protection in November 1998. By August 1999, SFX had acquired the assets of the defunct company, including musicals it had in development such as “Seussical” and “Sweet Smell of Success,” both of which later failed on Broadway.

In January 1999, Drabinsky and Gottlieb were indicted in a New York court on charges that they had misappropriated millions of dollars from American investors.

The Canadian government brought charges in 2002 and the case finally went to trial last May. The U.S. government put an extradition order on hold pending the results of the Canadian trial.

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