Former Broadway theater producers plead not guilty to fraud

TORONTO—Two former Broadway producers pleaded not guilty Monday to participating in large-scale accounting fraud.

Garth Drabinsky and Myron Gottlieb, co-founders of Livent, a major Broadway theater company in the 1990s that produced hit shows such as "Ragtime" and "Showboat," are charged with two counts of fraud and one count of forgery.

Their trial began Monday in Ontario Superior Court.

The Toronto-based company filed for bankruptcy protection after the alleged fraud was revealed when former Walt Disney Co. President Michael Ovitz invested in Livent.

Prosecutors allege the pair raised hundreds of millions in financing and that the fraud began even before Livent went public.

Drabinsky, Gottlieb and their lawyers declined to comment.

Prosecutor Robert Hubbard said he will call seven former Livent employees to testify that their former bosses falsified financial statements and had their accounting software modified to inflate income.

Hubbard said they hid production costs and inflated ticket sales to attract investors.

The prosecution's main witness is expected to be Gordon Eckstein, who was Livent's vice president of finance. He was given a conditional sentence after pleading guilty last year to one count of fraud.

Authorities allege that the manipulation of the books helped to build $100 million shareholder value that was lost when the fraud was revealed by a new management team headed by Ovitz.

Drabinsky, 58, and Gottlieb, 64, were fired and Livent filed for bankruptcy protection in 1998.

The U.S. Securities and Exchange Commission called it a "pervasive eight-year fraudulent accounting scheme."

The two are also charged in the United States but they have fought extradition and that case remains on hold.

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