BUSINESS

Gordon Eckstein, key player in Livent fraud scandal, reaches OSC settlement

05/22/2015 09:39 EDT | Updated 05/22/2016 05:59 EDT
TORONTO - Gordon Eckstein, one of the key players in the Livent Entertainment financial fraud scandal, has been permanently banned from being a director or officer of a public company or an investment fund manager.

But Eckstein, who once served as the vice-president of finance at Livent Entertainment, will be allowed to continue serving as an officer of the private company where he has worked for the past 12 years, according to a settlement approved Friday by the Ontario Securities Commission.

Defence lawyer Shayne Kert said Eckstein poses little if any risk to the capital markets, and has been the "poster boy of co-operation," testifying as a key witness for the prosecution in the criminal case against Livent co-founders Myron Gottlieb and Garth Drabinsky.

Eckstein, who participated in a book-cooking scheme at Livent and its predecessor companies, pleaded guilty in the Ontario Superior Court in 2007 to one count of criminal fraud.

His role included directing the company's accounting staff to manipulate the financial statements as per Gottlieb and Drabinsky's instructions, then reviewing the adjusted documents during executive meetings. He also supervised the creation of false accounting records.

Eckstein was given a conditional sentence of two years less a day, including a year of house arrest, while Gottlieb and Drabinsky were sentenced to five years and four years, respectively, after they were convicted of fraud in 2009. Both men were released on parole in 2012.

Eckstein "appreciates the nature of his misconduct" and is unlikely to reoffend, said Jed Friedman, a staff lawyer with the Ontario Securities Commission.

He received little financial gain from his participation in the fraud scheme — roughly $3,000 — and his 12-year employment shows he has been able to put the incident behind him and is "quietly continuing his life," said Kert.

The 1998 demise of Livent Entertainment, the now defunct live theatre company that was behind such theatrical hits as "Phantom of the Opera" and "Ragtime," cost investors an estimated $500 million.

The Ontario Securities Commission has put its long-running case against the three men on ice while they served sentences for fraud-related offences.

The provincial regulator reopened its case against the three men in 2013, and Gottlieb settled with the commission last September.

The terms of his settlement include being banned for life from being a director or officer of a public company or a director or officer of an investment firm. He has also been forbidden from trading securities — except for his registered retirement savings plan and registered retirement income fund — for 15 years.

Drabinsky has yet to settle with the provincial regulator.

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