Toronto theatre moguls Garth Drabinsky and Myron Gottlieb had their fraud convictions upheld this week but their sentences trimmed – reinforcing Canada’s lax reputation for prosecuting white-collar crime.
In 2009, Ontario Superior Court Justice Mary Lou Benotto found the impresarios guilty of manipulating the income reported by their now-defunct live theatre production company, Livent Inc. In her ruling, she stated that a “culture of cheating” existed at Livent, and “Drabinsky and Myron Gottlieb were at the centre of that culture.”
The Livent co-founders insist they are innocent and that it was their employees who doctored the books from 1992 to 1998 to make Livent’s finances appear more attractive to investors.
On Tuesday, the Ontario Court of Appeal upheld the 2009 fraud convictions but reduced Drabinsky and Gottlieb’s jail sentences by two years each. Why? Some $500 million of investors’ money was wiped out when Livent went bankrupt in 1998. But the court decided these losses “cannot, in our view, be laid entirely at the feet of Drabinsky and Gottlieb.”
Reducing these fraudsters’ jail time weakens what could have been an important precedent for white-collar convictions in this country and undermines the lipservice currently being given to raising the bar on investor protection. Talk is cheap, and when deterrents to fraud are weakened, it’s the little guy who suffers. Drabinsky is now slated to spend five years behind bars and Gottlieb four. But, under Canadian rules, they won’t serve anywhere near that amount of time.
Drabinsky will be eligible for parole in 14 months and Gottlieb in less than a year. And the people who invested in Livent? The appellate judges feel their pain. “We do not mean to suggest that this was not a large-scale and significant fraud,” they wrote. “It clearly was.”
That and a toonie will buy Livent investors a cup of java at their favourite coffee bar.