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Drabinsky, ordered to pay $36.5M

TORONTO (CP) _ An Ontario judge has ordered Garth Drabinsky and Livent Inc. co-founder Myron Gottlieb to pay US$36.5 million to noteholders who lost their investments when their theatre production company went bankrupt.

The money u $23 million plus prejudgment interest u had been awarded to the noteholders by U.S. District Judge Victor Marrero in 2005 after his ruling against the two men the previous year.

Gottlieb and Drabinsky declined to submit a defence in those proceedings during more than six years of litigation.

The investors, represented by noteholders Dorian and Diane King in a class-action suit, purchased about $125 million worth of unsecured notes. The U.S. judge found the Canadian businessmen directed the preparation of incorrect financial statements.

The U.S. litigants applied to the Ontario Superior Court of Justice to enforce the American court’s financial award.

The case was heard in May by Justice Herman Siegel. In a judgment released last week, Siegel ruled in the investors’ favour.

Drabinsky and Gottlieb participated in a transaction "to their financial benefit that was conducted in the capital markets of the United States," Siegel wrote.

"It is not unreasonable to be subject to criminal and civil proceedings in the United States" if a misrepresentation of a statement to investors caused losses, Siegel said.

Drabinsky and Gottlieb say they were handcuffed in conducting a defence because their bail terms on Canadian charges u requiring they remain in this country u did not allow them to appear in the U.S.

But Siegel said they could still have mounted a defence in the civil suit even without travelling there. Neither man sought an amendment in their Canadian bail conditions to travel to defend themselves in the U.S. civil trial, he added.

In the Canadian charges, which go to trial in May, Drabinsky and Gottlieb are accused of defrauding $500 million from the defunct theatre company.