In November 1998, Livent sought bankruptcy protection in the US and Canada, claiming a debt of $334 million, and securities regulators in both Canada and the US began investigating Livent's books.
Canadian proceedings On March 25, 2009, Drabinsky and Livent co-founder
Myron Gottlieb were found guilty of
fraud and
forgery in
Ontario Superior Court for misstating the company's financial statements between 1993 and 1998. Drabinsky was sentenced to seven years in jail on August 5, 2009, for his role in the case. Drabinsky filed an appeal in the
Ontario Court of Appeal with respect to his sentence on September 3, 2009. During that appeal, he remained free on bail. On September 13, 2011, the Court of Appeal, while upholding the convictions, reduced Drabinsky's sentence to 5 years. Drabinsky applied for leave to appeal to the
Supreme Court of Canada, and the application was dismissed without costs on March 29, 2012. Drabinsky was originally held at
Millhaven Institution, for assessment. In December 2011, he was transferred to serve out his sentence at
Beaver Creek Institution, a minimum security prison, located in
Gravenhurst, Ontario, and was released on
day parole in February 2013. Administrative proceedings were initiated against Livent, Drabinsky and others by the
Ontario Securities Commission in 2001, and they were suspended in 2002 until all outstanding criminal proceedings had been completed. In February 2013, the OSC announced that hearings would take place on March 19, 2013, in the matter. Myron Gottlieb and Gordon Eckstein, who were the other parties in the proceedings, subsequently entered into settlement agreements with the OSC in September 2014 and May 2015 respectively. In 2017, the
Ontario Securities Commission permanently banned Drabinsky from becoming a director or officer of any public company in Ontario. The OSC also prohibited him from acting as an investment promoter, and banned him from trading securities (other than as a
retail investor, for trades within his
RRSP or through a registered dealer for accounts in his name only).
US proceedings In January 1999, Livent reached an administrative settlement with the
Securities and Exchange Commission, while civil and criminal proceedings were simultaneously pursued against Drabinsky, Gottlieb and certain other former Livent employees. In 2005, former investors in Livent corporate bonds won a $23.3 million judgment against Drabinsky and Gottlieb in the
United States District Court for the Southern District of New York, for which enforcement of the judgment was upheld by the
Ontario Court of Appeal in 2008. On June 25, 2019, legal authorities in New York dismissed all outstanding criminal charges against Drabinsky (almost 20 years after accusing him of fraud involving Livent Inc.) with prejudice. Assistant United States attorney, Sarah Eddy, said the dismissal is appropriate because Mr. Drabinsky had already been prosecuted in Canada for the fraud. While the outstanding charges had been dormant for many years, they impeded Mr. Drabinsky from being able to travel to the United States, for fear of extradition. Drabinsky is now free to travel to-and-from the United States, and has been doing so frequently while working on his new musical,
Paradise Square (formerly titled,
Hard Times).
Disbarment On July 17, 2014, Drabinsky was disbarred by the Tribunal of the
Law Society of Upper Canada for unbecoming conduct, having been found guilty of defrauding the public and forging certain financial statements. The Tribunal's order, effective immediately, revoked his licence to practice law in the province of Ontario.
Order of Canada On November 29, 2012,
Governor General David Johnston signed an Ordinance of Termination revoking Drabinsky's membership in the
Order of Canada, originally conferred in 1995 in the Officer grade. Drabinsky subsequently filed an application in the
Federal Court of Canada to block his removal, which was dismissed on January 9, 2014. He subsequently appealed the decision to the
Federal Court of Appeal. The appeal was heard in December 2014, and rejected the following month, when the court held that there was "no basis" for it to intervene in the matter. ==Bibliography and documentary==