MONTREAL — The ongoing scandal at Canadian TV producer Cinar Corp. deepened substantially Monday with the announcement that founders Micheline Charest and Ronald Weinberg have ankled their top jobs at the Montreal company and that some $122 million in Cinar funds is missing in action.
In a statement, company said that about $122 million was invested without the approval of the board of directors and, of that, $86 million was pledged to secure other investments. According to the statement, the company has not been able to determine with any clarity the nature of those other investments or their value.
Charest has resigned as chairman and co-CEO and Weinberg has stepped down as president and co-CEO. But both execs, who are a married couple, will remain directors of the company, and, according to the statement, “retain leadership roles in the company.”
New management has told analysts that neither Charest nor Weinberg was aware of these investments. Senior executive vice president Hasanain Panju has been fired from the company and relieved of his duties on the board of directors.
Usher named prexy
Barrie Usher has been appointed president and CEO of Cinar, with Lawrence Yelin named chairman of the board. Usher was previously senior vice president of Manulife Financial Corp. and president and CEO of New York Life Insurance Co. of Canada. Yelin is a senior partner of the law firm Fasken Martineau DuMoulin and a longtime member of the Cinar board.
Prior to the controversy, Cinar was one of Canada’s most successful entertainment companies thanks to such kids series as “Arthur,” “Caillou,” “Wimzie’s House” and “The Busy World of Richard Scarry.” It also has extensive educational publishing holdings.
The discovery of the mystery investments came as the result of an internal audit launched by the Cinar board last fall following allegations that Cinar had abused the Canadian film tax-credit system.
Opposition members of Parliament charged that Cinar put the names of Canadians on screenplays that were actually written by Americans in order to fulfill the Canadian-content requirements of the tax-credit program.
At the time, Cinar attempted to minimize the implications of the allegations, saying the charges “will not have any material adverse impact on the financial position or results of the company.” But two weeks ago, the company released a statement acknowledging that its financial results would be significantly hurt by the conclusions of its internal audit.
The day after the announcement, Cinar’s shares dipped 25% on the Toronto stock exchange. Trading was halted on Cinar’s stock prior to the announcement Monday. Cinar said Monday that it now may not be able to release its 1999 financial statements within the time prescribed by statute. Canadian media have reported that Cinar is on the verge of inking a deal with Revenue Canada to pay back C$10 million ($6.9 million) in back tax credits.
In addition, New York law firm Milberg Weiss Bershad Hynes & Lerach has filed a class-action suit in U.S. District Court in New York on behalf of purchasers of Cinar stock. The suit charges that Cinar’s financial results were “artificially inflated as a result of fraudulent tax practices.” The plaintiffs allege violations of U.S. securities laws and request a jury trial.
A stockholders’ rights group in Quebec, L’Association de Protection des Epargnant et Investisseurs du Quebec, has filed a class-action suit in Canada against Cinar.