A Sentence for Fraud

On August 5, 2009, entertainment moguls Garth Drabinsky and Myron Gottlieb were sentenced to seven years and six years respectively for fraud in relation to their conduct of the business of Livent Corporation. The trial judge, Madam Justice Benotto of the Ontario Superior Court of Justice found them guilty of numerous manipulations of the accounting records and financial statements of the company, saying “Complex systems were in place at Livent to effect all these manipulations. Employees knew that entries in the books were being moved. One employee spent his entire time moving expenses from one place to another. He knew it was wrong but had a family to feed.”

The Crown asked Justice Benotto to impose a sentence of 8-10 years. The defence sought conditional sentences to be served in the community of two years less a day, which would include speaking tours by the Defendants with lectures “inspiring young people” and on “business ethics.” Justice Benotto correctly observed that in cases of large scale fraud, general deterrence must be a paramount sentencing goal. In summarizing the general principles of sentencing in such cases, she said:

The business community must be put on notice that deception and dishonest dealing will be punished severely, whether the victims are the vulnerable and unsophisticated or well-resourced financial institutions driven themselves by a desire for profit. The members of the business community must understand that honesty is the currency in which they trade.

In applying these important principles to the case before her, Justice Benotto concluded:

Mr. Drabinsky and Mr. Gottlieb presided over a corporation whose corporate culture was one of dishonesty. Corporate fraud such as this results in tangible losses to employees, creditors and investors. It also results in less tangible, but equally significant loss to society. It fosters cynicism. It erodes public confidence in financial markets. The Court has a duty to strongly denounce such conduct. Those in business must know and the community must know that this will be the Court’s response to corporate fraud.

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