8/13/2019 Synopsis Livent

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Synopsis

Founded by Garth Drabinsky and Myron Gottlieb, Livent Inc. was a live theatrecompany with outlets in Toronto, ancouver, !hica"o, and #ew $ork. In %&&',Livent(s )inances were *uestioned by an investment "roup led by +ollywood mo"ul

Michael vit-. +e )ound out many systematic irre"ularities that )looded thecompany(s accountin" records. S ! was bothered with two si"ni)icant evidencesthat contribute to the )raud. The )irst one was that Livent(s senior mana"ementmanipulated the real )inancial data, usin" computer so)tware developed by Livent(saccountin" sta)). Due to this so)tware the Deloitte auditors, had a hard time tonotice the )raud. The last one was the manner that Livent planned the )raud andhow they have e/ecuted it. The independent auditors o) Livent were censured )ornot discoverin" the material misstatements in the )inancial report o) the company.

The )raud was so common that as independent auditors o) Livent this should havenoticed the indiscretions. Like the a""ressive nature o) the company, carelessnesso) )inancial reportin" by company o))icials, abrupt increases in capital andtransactions with related parties. This should have been enou"h clues to theauditors to )ind out that there is a risk that Livent(s )inancial statements maycontain material misstatements. 0)ter unravelin" this )raud, Drabinsky and Gottliebwere )ired. S ! char"ed them with producin" )alse )inancial statements to make thecompany look more pro)itable than it actually was. Their trial started in 122' a)ter alon" delay.

Several witnesses admitted to their participation in the )inancial manipulationdurin" the trial, but their reason )or doin" such action was because o) the Drabinskyand Gottleib(s orders. +owever, Drabinsky and Gottlieb denied the accusations andasserted that the )raud was done by their subordinates prior to their knowled"e.Drabinsky and Gottlieb(s attorneys *uestioned the reliability o) the witnesses(accusations and ar"ued that the accountin" sta)) had bypassed the accountin"controls that Drabinsky made. The de)ence presented no witnesses and Drabinskyand Gottlieb did not testi)y. ventually in 122&, Drabinsky and Gottlieb were )ound"uilty o) )raud and )or"ery. 3oth Drabinsky and Gottleib were sentenced seven andsi/ years in prison. 0round 12%%, the ntario !ourt o) 0ppeals reduced theirsentences by two years each. The Institute o) !hartered 0ccountants o) ntario also)ound out that three senior Deloitte 4 Touche LL5 auditors were "uilty o) makin"errors durin" an audit o) Livent(s )inancial statements. 0ll three o) them were )ined6%22 222 each.