Former theatre mogul heads for halfway house

Investors lost $500M after fraud led to demise of Livent Inc.

GRAVEN HURST, ONT. • Former theatre mogul Myron Gottlieb will be able to leave prison for a halfway house in Toronto after the parole board granted him day parole Friday, but denied him full release.

Gottlieb and Garth Drabinsky, the co-founders of now-defunct Livent Inc., were convicted of two counts each of fraud in a scheme to falsify financial statements in a bid to lower expenses and keep pace with lofty earnings projections.

Livent, behind such hits at Phantom of the Opera, filed for bankruptcy soon after the fraud was discovered in 1998 and its demise cost investors about $500-million.

In denying the 69-year-old full parole the Parole Board of Canada pointed to a discrepancy between how Gottlieb characterized his role in the fraud — only discovering it years in and failing to put a stop to it — and the courts’ findings that he was one of the drivers of the scheme.

“You committed a serious crime,” board member John Muise told Gottlieb in rending the decision. “You have significant deficits in your attitude.”

Gottlieb apologized for his crime, saying he should have spoken up in August 1997, when he said he realized the second-quarter financial report was off by about $24-million.

“I spent a lifetime trying to build a reputation and I blew it very fast,” he told the hearing. “When I knew it was happening, it was like hitting a brick wall and I can’t forgive myself.”

The accounting department had made adjustments all along, since the company went public in 1993, Gottlieb said, but it was the amount in 1997 that caught his eye.

He asked senior staff members about it and was told, “sure, it’s high, but it’s going to be self-correcting within a couple of quarters,” Gottlieb said. His mistake was taking their word and not further scrutinizing the books, he said.

“I am sick that I didn’t step up and push it so hard to be legitimately satisfied or put a stop to it,” Gottlieb said. “For that I assume responsibility. I am remorseful that my gut feeling was accurate and I just accepted what I was told and it was wrong. It was absolutely wrong.”

Gottlieb said he has a negative net worth right now, and Mr. Muise said money troubles are another risk factor, when considering Gottlieb’s offence was financial.

Gottlieb becomes eligible for full parole in January, but was hoping the board would pre-approve his release, as well as grant him day parole now. Day parole is granted for sixmonth terms, so at the end of this six months the board might also reconsider his application for full parole.

Offenders on day parole must return each night to an institution or halfway house.

Despite being sentenced in 2009, Gottlieb and Drabinsky had been on bail pending appeal and didn’t start serving their prison time until last September, when the Appeal Court upheld their convictions and reduced their sentences by two years each, leaving Drabinsky with a five-year sentence and Gottlieb with four years.