Court Denies Drabinsky's Challenge to Livent Investigation

News   Court Denies Drabinsky's Challenge to Livent Investigation An Ontario court has struck down one of deposed Livent founder Garth Drabinsky's legal challenges to accounting firm KPMG/Peat Marwick's investigation of the theatre production company's books. On Sept. 16, Drabinsky filed a law suit attacking KPMG, then in the midst of inspecting Livent's books for financial irregularities practiced under Drabinsky's tenure. The impressario also requested that an injunction be placed on KPMG's findings. Livent received KPMG's final report on Oct. 22 after the court approved its delivery.

An Ontario court has struck down one of deposed Livent founder Garth Drabinsky's legal challenges to accounting firm KPMG/Peat Marwick's investigation of the theatre production company's books. On Sept. 16, Drabinsky filed a law suit attacking KPMG, then in the midst of inspecting Livent's books for financial irregularities practiced under Drabinsky's tenure. The impressario also requested that an injunction be placed on KPMG's findings. Livent received KPMG's final report on Oct. 22 after the court approved its delivery.

"This report is what the company has been seeking all along," said Livent officials in a statement, "an objective account of the facts." Drabinsky's suit against KPMG is still pending.

Drabinsky claimed KPMG holds a conflict of interest in the matter, because the firm has been the impresario's personal accountant for 20 years and was also Livent's new management team enlisted to inspect the company's books earlier this year.

Drabinsky, along with Livent co-founder Myron Gottlieb, was suspended on Aug. 10 by the company he helped create. Livent, which was taken over last spring by a new management group headed by Roy Furman and Mike Ovitz, cited accounting regularities totaling in the millions. Furman has said a restating of the company's financial results for 1996, 1997, and the first quarter of 1998 was "virtually certain."

Livent said on Oct. 22 that it expected to complete a restatement of its finances by the second week of November. Until the suit, Drabinsky had protested his removal but done little else in his defense, even while he saw Roundabout head Todd Haimes supplant him as Livent's new artistic director.

Daniel Roebuck, of Roebuck, Garbig, told Variety Drabinsky had objected to KPMG's appointment the moment it was made, but his protest has been dismissed. As for Drabinsky's delay in filing the suit, Roebuck said the producer has been busy sorting out his life as it has come "crashing around him." Roebuck did not return a call by press time.

The suit argues that KPMG's conflict of interest stems from its long held and extensive knowledge of Drabinsky's finances -- information it could use in its investigation of Livent's situation. The suit also questions the ethics of the accounting firm being brought in, since it purportedly conducted the same job for Furman et al last spring.

* In one of the biggest artistic power shifts in the theatre in recent memory, Todd Haimes, head of the Broadway and Off-Broadway powerhouse Roundabout Theatre Company, was recently named the new artistic director of Livent, the once dominating, but now financially struggling Canadian production company. Haimes will assume his post immediately, while continuing in his artistic director duties at the Roundabout through the coming season, including the company's move into the Selwyn Theatre.

Director Scott Ellis, who has staged such hit Roundabout productions as She Loves Me and 1776, will assist Haimes at the Roundabout as associate artistic director.

"Todd's artistic excellence and creative touch have enabled him to mount a string of critically acclaimed productions at Roundabout that have enjoyed commercial success," said Livent Chairman and CEO Roy Furman (Sept. 2). "These productions have shown his ability both to handle multiple projects simultaneously, which is essential for us at Livent, and to present shows widely varying in tone, content and audience."

Haimes said, "Joining Livent give me the opportunity to work in the theatre on a scale and with a palette that holds almost limitless artistic and creative possibilities."

Livent also promoted its associate producer Marty Bell to senior producer. Bell will oversee Livent's productions of Ragtime, Fosse, and Parade.

In the course of the last month, Livent has gone from a theatrical force akin to Disney, to a hobbled giant with an uncertain future. In August, the company's new management team, headed by Furman and Mike Ovitz, discovered accounting irregularities dating back to 1996 involving millions of dollars. The discovery lead to the ouster of Livent founders Garth Drabinsky and Myron Gottlieb. The two officials, who ran Livent as recently as April, are on suspension until a financial investigation is completed. Since then, accusations that Drabinsky kept two set of books have arisen and Livent has been hit by several class-action suits.

Haimes will be taking over the artistic end of the company -- formerly Drabinsky's province. The Roundabout chief would seem a logical replacement for the famously profligate Drabinsky. Over the last eight years, the frugal Haimes successfully brought the Roundabout back from the brink of bankruptcy, transforming it from a tired Off-Broadway institution into a Tony-nominated titan of New York theatre. Some productions Haimes has shepherded over the years include successful revivals of Anna Christie and She Loves Me. The past season alone produced A View From the Bridge and 1776, both of which transferred to Broadway houses, and Cabaret, perhaps the biggest hit in New York.

-- By Robert Simonson

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