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Livent files for bankruptcy
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November 18, 1998: 7:21 p.m. ET
Broadway show producer to restate earnings back to '96, sues co-founders
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NEW YORK (CNNfn) - Troubled Broadway show producer Livent Inc. Wednesday filed for bankruptcy protection, restated its earnings for the last nine quarters, fired co-founders Garth Drabinsky and Myron Gottlieb and filed a C$225 million lawsuit against them.
In turn, Drabinsky and Gottlieb filed countersuits against the Toronto-based company totaling C$200 million against Ron Furman, the company's current chairman, and former Walt Disney Co. executive Michael Ovitz, who owns a 12-percent stake in Livent.
Livent's troubles began in August when it suspended Drabinsky and Gottlieb, who had been chairman and president, respectively, after discovering what it termed "serious" accounting irregularities regarding millions of dollars in fake revenues.
Livent, the producer of such Broadway hits as Ragtime and Phantom of the Opera, said Wednesday it would restate its financial results dating back to 1996, reducing its net income by $85.1 over that period. The company also reported a second-quarter loss of $45.8 million.
Additionally, the company filed for Chapter 11 bankruptcy protection to delay repayment of C$230 million in debt. Livent made the filing in U.S. Bankruptcy Court for the Southern District of New York. The company said it is also considering bankruptcy protection in Canada.
"The massive scale of the accounting irregularities and inappropriate business practices uncovered at Livent has left us no choice but to file for protection under Chapter 11," Furman said.
On Tuesday, Standard & Poor's and Moody's Investors Service both downgraded their ratings on more than C$125 million in Livent obligations in anticipation of the company filing for bankruptcy protection.
Officials at the New York State Attorney General's office Wednesday denied reports the office was investigating alleged financial irregularities at Livent. The Royal Canadian Mounted Police has been probing the company's finances since October.
Livent also said it has filed a C$225-million suit in Ontario Court against Drabinsky and Gottlieb on charges of breach of contract, fraud, conspiracy to defraud Livent and unjust enrichment.
Co-founders countersue
In a suit filed with the Ontario Court, Drabinsky alleged that Ovitz, Furman and their associates acted in concert to injure him. Drabinsky is seeking damages of C$100 million. Gottlieb said he will file a similar suit for C$100 million in damages.
Drabinsky's suit accuses Furman conspired to injure him by secretly approaching Ovitz to become an investor in Livent without Drabinsky's knowledge. The suit also charges Furman with closing the Ovitz deal with the intent to remove Drabinsky from his post as artistic director, as well as "causing Drabinsky financial distress to compel him to sell his shares at distressed prices."
In addition, Drabinsky charged Ovitz, Furman and others with conspiring to "change the artistic direction of the company without Drabinsky's consent," along with colluding to "tarnish his reputation in the artistic and financial communities to eliminate him as the creative force within the company or as a competitor."
"This is a sad day for live theater and a sad day for Livent shareholders," Drabinsky and Gottlieb said in a statement. Livent's filing of a lawsuit against us on the eve of seeking creditor protection is window dressing, intended to deflect attention from their own ill conceived decisions." 
-- from staff and wire reports
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Livent
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