Supreme Court to hear appeal over $118M Livent judgment

OTTAWA — The corporate auditor to the former high-flying Livent theatre company will be allowed to appeal against a multimilliondollar judgment over its audit work for the one-time entertainment giant.

The Ontario Court of Appeal said in January Deloitte and Touche was partly responsible for the hundreds of millions of dollars creditors ended up losing to the fraudulent behaviour of impresario Garth Drabinsky and his longtime partner, Myron Gottlieb.

The appeal judges upheld a lower court ruling that ordered Deloitte to pay $85.6 million — $118 million with interest. The appeal court agreed with the trial judge the auditor had been negligent in failing to detect and act on Drabinsky’s fraud.

The Supreme Court of Canada agreed on Thursday to hear Deloitte’s appeal.

Under the flamboyant Drabinsky, Livent Inc. brought popular shows such as Phantom of the Opera and Joseph and the Amazing Technicolor Dreamcoat to stages across North America.

But the courts ruled the apparent success was based on a massive sleight of hand that included cooking the books, kickbacks and manipulated expenses. The courts said there were numerous red flags for several years that Deloitte essentially ignored.

“Deloitte knew that Drabinsky and Gottlieb were aggressive entrepreneurs who pushed the envelope in terms of accounting and financial measures,” the appeal court said in a 100-page judgment. “It is more likely than not that a careful and objective investigation into Livent’s financial statements, pursued with ‘an attitude of professional skepticism,’ would have revealed the fraud.”