Drabinsky To Focus On Accounting Reviews When Canada Court Hears Civil Case in January

News   Drabinsky To Focus On Accounting Reviews When Canada Court Hears Civil Case in January Garth Drabinsky, the theatre impresario once responsible for staging Tony Award winning shows on Broadway, will soon be in a Canadian court facing a real life drama.

Garth Drabinsky, the theatre impresario once responsible for staging Tony Award winning shows on Broadway, will soon be in a Canadian court facing a real life drama.

When the Toronto court convenes in early January, the former producer of Ragtime, Show Boat and Kiss of the Spider Woman will focus his arguments on alleged undeclared conflicts of interest within the accounting reviews of Livent in 1998 and 1999. Certain aspects of the reviews, Drabinsky will say, were injurious to him following his departure from Livent.

Though the nature of Drabinsky's claims is not surprising, the fact that they form the foundation of his strategy is news.

A Drabinsky spokesperson told Playbill On-Line that the founder and ousted head of both Cineplex Odeon and Livent is optimistic and believes he will prevail in court. The case is expected to be heard by a judge familiar with the issues. This could make for a speedy trial -- possibly as little as two or three weeks in length.

Drabinsky believes the accounting reviews of Livent were injurious to him because of alleged undeclared conflicts of interest, and because certain "Chinese Walls" were not erected by the parties involved. Drabinsky's representative said there were clear linkages between the accounting firm KPMG, the former Livent and Michael Ovitz, and that actual practice contradicted Livent's August 1998 promise of an independent and objective review of Livent's accounting. There is a certain irony evident in these claims because Drabinsky and his partner, Myron Gottlieb, were ousted from Livent in 1998, following allegations of financial irregularities and claims that the two executives had cooked the books.

The once high-profile Drabinsky began his career in entertainment law. In 1978, he founded Cineplex Odeon, which he built into an empire boasting some 1,800 screens.

Later, in need of money, Drabinsky brought in MCA for financial support. But he was forced to resign from Cineplex Odeon when MCA raised issues over his accounting practices. [Coincidentally, there was a subsequent deal whereby the Bronfman family-controlled Seagram company purchased MCA, Inc. At that time, MCA, Inc. was the entertainment unit of the Japanese firm Matsushita Electric Industrial Company. The $5.7 billion purchase of MCA by Seagram was brokered by Michael Ovitz, the former Hollywood agent who was in talks with Seagram president Edgar Bronfman, Jr. to run the entertainment giant. When they could not come to terms, Ovitz went to work at Walt Disney, but left after falling out with Disney head Michael Eisner.]

When Drabinsky left Cineplex, he took the Canadian rights to Phantom of the Opera and a $4 million severance from MCA and started Livent.

It was at Livent that Drabinsky saw real success in theatre. But his rise on Broadway was defined by lavish spending on advertising and production, which resulted in peer skepticism. Even today, Drabinsky is remembered as much on Broadway for his excess as for his success.

In April 1998, Drabinsky brought in Michael Ovitz, who had left Disney. With a $20 million personal investment, Ovitz took financial control of Livent. Four months later, in a memorable Aug. 10 announcement, Livent announced the discovery of accounting irregularities and suspended Drabinsky and his partner Myron Gottlieb.

The Livent crisis escalated through the fall of 1998 when the company declared bankruptcy and Drabinsky and Gottlieb were dismissed. In January 1999, U.S. Attorney Mary Jo White filed charges against Drabinsky in the United States. Drabinsky has been in Canada since the securities fraud charges were filed in the U.S., and faces arrest if he returns to this country.

Other than to confirm the outstanding warrant, the U.S. Attorney Office spokesman told Playbill On-Line that there were no significant changes or updates to report with the Drabinsky case.

There are several lawsuits pending as a result of the collapse of Livent. There is a stockholder class action suit that was filed in the United States on Aug. 13 1998. This trial could be moved to Canada, which is where Livent was based and where the Drabinsky camp might prefer it be heard. There are other cases, with Michael Ovitz suing Drabinsky and Gottlieb separately, and still others with Drabinsky and Gottlieb counter suing.

After a year of seclusion from the media, Drabinsky surfaced with a Dec. 14 exclusive interview with the Daily News' Douglas Feiden. In that interview, Drabinsky said he "fully expects to be producing on Broadway again in the future."

-- By Murdoch McBride