Garth Drabinsky’s fatal flaw

Everything one needs to know about why Garth Drabinsky perpetuated one of the most audacious frauds in Canadian history can be gleaned from document 88960, submitted during his trial. It’s the ultimate forensic evidence: a draft of a love letter the impresario wrote to his former girlfriend, Karen Poppell, months before his theatrical empire, Livent, collapsed in 1998.

The 10-page missive seized from Drabinsky’s office offers a private glimpse of the qualities that propelled him to risk all. By turns passionate, frustrated, and buoyant, the note reveals an against-all-odds determination and refusal to concede defeat. Befitting a man who intuitively grasped the box-office power of the Phantom of the Opera, the language is romantically charged, with talk of “true spiritual and emotional union.” Then, in a petulant digression, he complains Poppell hadn’t gotten around to reading his 1995 autobiography, Closer to the Sun.

Like all love letters, it’s part sales pitch. Poppell was apparently displeased with the relationship’s progress; Drabinsky itemizes her grievances, which include not being introduced to his parents and the way his pilot filled in customs forms. Yet, with the play-it-forward optimism that propelled his career, he expresses high hopes for “Garth & Karen—forever.” He alludes to new “financing,” presumably the US$20 million Michael Ovitz invested in Livent in February 1998, which put in motion discovery of accounting fraud: “After a wonderful Christmas, we entered the year buoyed up with a new confidence that in February my financing would close, you would move to Toronto . . . [and] by the end of March I would be out of my marriage.”

Drabinsky seemed to be in arrears on some kind of promise schedule, which he blamed on his “sense of optimism and confidence that if I am determined I will not fail . . . I am not a gay deceiver, but I am too much of an optimist. I over-evaluate. I have learned my limits. The task was simply much larger than I appreciated.” He hadn’t been forthright, he explains: “I never wanted to admit weakness to you or dilute your confidence in me.”

The admission, ironically, has equal resonance for Livent investors. It also explains, in a nutshell, the motivation for the company’s spectacular rise—and fall. Friends speak of the manic pride that propels Drabinsky to work 18-hour days. “He never allowed anything to get in the way to stop him, which is the only way he could ever have accomplished what he accomplished,” says the film producer Robert Lantos. “There was no obstacle that couldn’t be climbed or torn down or barrelled through.” A former colleague has seen the darker side of that drive: “He must win. He will not brook interference. He won’t tolerate anyone who fails to get it or see it or agree. If they don’t, they’re not just wrong but ignorant and stupid and dismissed.”

The Crown submitted the letter as proof Drabinksy had financial motive to commit the $500-million fraud. And certainly it conveys financial distress: he writes of being “strangled” by “an impossible level of personal debt” for the previous five years. But Justice Mary Lou Benotto, who last week found Drabinsky, 59, and Livent co-founder Myron Gottlieb, 65, guilty of two counts of fraud and one of forgery, didn’t buy the money-as-motive rationale, noting in her 85-page ruling: “The motive was the continuation of the company.”

And, as the nine-month trial revealed, continuation of the company entailed defying financial rules governing the business. But, if the title of Drabinsky’s autobiography is any indication, with its allusion to Icarus, the figure in Greek mythology who plummeted to earth after daring to fly too close to the sun with wax wings, not even the rules of classic mythology apply to him. “I think the bastard just gave up too soon,” he writes. “He should have gotten himself another set of wings and taken off again!” When he wrote those words in 1995, newly anointed as a member of the Order of Canada, Drabinsky appeared to have done just that, having crashed to earth once with his flame-out at Cineplex, only to ascend once again at Livent.

The tale of Drabinsky’s epic ambition begins long before that, however. He writes of his struggles after he contracted polio in 1951, at age three, and of the series of painful operations during his childhood that left him with a limp. In Closer to the Sun he recalls worrying the camera would capture it when he accepted a 1993 best musical Tony award for Kiss of the Spider Woman.

The notion that theatre could provide an alternative reality first occurred when he was a high school student watching Molière’s The Imaginary Invalid: “I knew right away I wanted to be part of this,” he writes. His first taste of the business of show occurred shortly after, at the Canadian National Exhibition, where he had a job analyzing handwriting, or, as he describes it, “bulls–t analysis.” It taught him a valuable lesson: “I was amazed at how credulous people were, how accepting of the most obvious con.” His carny days bestowed another take-away: that lineups drew a crowd.

Drabinsky arrived on the Canadian film scene in the late ’70s as a double threat: a master salesman who’d also written the book on entertainment law, literally, after being called to the bar in 1975. His Motion Pictures and the Arts in Canada: The Business and the Law became the industry bible. He dabbled in producing theatre and film to varying degrees of success. His greatest: the 1977 movie The Silent Partner with Christopher Plummer.

Early on, he displayed a knack for employing business tools—tax law, public offerings and clever financing—to create art. In 1979, he launched the first Canadian public film offering, a tax shelter, to finance The Changeling, starring George C. Scott. Gottlieb, then the president of a Bay Street brokerage, structured the deal. Bay Street was shocked by its audacity, and by Drabinsky’s three-pronged fee as lawyer, producer and distributor, says an industry insider. “He was legal but had pushed the limits to the nth degree.”

Drabinsky shot down the skeptics in an interview with Maclean’s: “Who’s going to perpetuate the business?” he asked. “The actors? The gaffers? No, it’s the entrepreneurs.” Soon after, when told the resulting story might be critical, Drabinsky took the extraordinary step of visiting the printer to read a copy fresh off the press. In what would become a recurring pattern, he sued for $10-million, claiming the piece impeded his ability to sell units. He settled out of court for $75,000 and a letter of apology.

Yet, as he admits in his book, the project exhausted his own line of credit and investors recouped only 60 per cent (above any tax writeoff). A small group was so disgruntled they sued Drabinsky and his partner for fraud. The case dragged on for 12 years before it was dismissed in 1994.

Drabinsky’s creative impulse next surfaced at Cineplex. The original multiplex concept was the brainchild of Nat Taylor, a veteran industry executive. But Drabinsky came up with the novel idea of building an 18-screen theatre in a parking garage under the Eaton Centre. With its marble floors, managers in tuxedos, cappuccino in the café and real butter on popcorn, the theatre became the prototype. Other innovations followed: computerized tickets that allowed early purchase, and airing commercials before features. By then a serious collector of Canadian art, Drabinsky used the theatres as exhibition spaces to showcase Canadian artists.

Cineplex went public on the Toronto Stock Exchange in 1982 and Gottlieb came on board in the mid-’80s. Throughout its breathtaking, debt-fuelled North American expansion, the company was dogged with charges of aggressive accounting. Still, it attracted major investors—first the Bronfman family, then powerhouse MCA, which took a 49.7 per cent stake in 1986, leaving Drabinsky and Gottlieb with only eight per cent. The pair’s bold and unsuccessful attempt to mount an end run on management resulted in their ouster from the board in December 1989. They took with them the kindling for their next bonfire: Cineplex’s money-losing live entertainment division—Toronto’s Pantages Theatre, which Drabinsky acquired in 1986 and painstakingly refurbished, and the Canadian rights to Andrew Lloyd Webber’s The Phantom of the Opera, which had been playing there for two months. MCA subsequently critiqued Cineplex’s accounting, but nothing ever came of it.

At Livent, Drabinsky amped up the spectacle, Gottlieb managed the money. The opening of a lavish new theatre in North York, Ont., in 1993 reflected his MO. “Garth knew he needed an extraordinary play to generate press,” says Stephen Cera, who ran Livent’s concert music programming. A controversial revival of Jerome Kern’s Show Boat filled the bill. “All of the critics from New York were sitting there,” he recalls. “It became an irresistible event.” To launch the smaller recital hall, Drabinsky secured famed soprano Dame Kiri Te Kanawa. “To engage the reigning opera diva in the world to sing in a 1,000-seat recital hall in a suburban location is not a slam dunk,” says Cera.

Money helped. Drabinsky was known for treating—and paying—big talent better than anyone. “I could bring you a parade of stars who would lie in front of his car if he wanted them to,” says a former colleague, who recalls the rich deal struck by Colm Wilkinson, the original Phantom in the first Toronto run. “His agent discovered Garth had been a movie producer. So they sent back a contract for a movie. They wanted part of the house, a car, whatever, and Garth signed it back.”

Those who dared cross him were treated more harshly. “If you even raise a query that can be interpreted as a challenge,” says a former colleague, “it’s almost poltergeist in response. When he goes, he goes into a frenzy—very, very loud and very obscene; it’s as close to physical as I’ve seen without landing a blow. And the next day he can be all smiles.”

Yet many former colleagues remain steadfast, speaking of Drabinsky’s sensitivity and kindness. “He’s interested in the human condition, and stories that depict injustice,” says Annie Allen, a Livent resident director. “What struck me was his vast interest in every person he was seeing and where the arts were at and where they should be going.”

Drabinsky fussed over every detail—from concept to fabric swatches for costumes—of big-budget productions that changed the ecology of Broadway. Showboat was a three-hour-long extravaganza, with 20 scenes, a crew of around 170, 500 costumes, and eight computers controlling sets, sound and lights. It cost US$700,000 a week to mount, a Broadway record, as was the US$75 charged for an orchestra seat. Livent’s advertising spending forced other shows to advertise defensively. Everyone knew the company couldn’t be making money, says an insider: “It defied the laws of financial gravity.” But no one dared speak out. “They still needed jobs.”

Everything Drabinsky staged was intended to blow away expectations. Likewise, all he did in business flouted industry practice. He boasted of Livent’s “vertically integrated structure” reminiscent of the old-style movie studios that offered unparalleled creative freedom. It also allowed money to be moved from one show to finance another. As the Drabinsky-Gottlieb trial revealed, Livent itself was an accounting illusion every bit as spellbinding as its big-budget special effects. Numbers were moved like chess pieces: in one example, a net loss before taxes of $41 million was “adjusted” to a profit of $14 million. Income was boosted, pre-production costs transferred to fixed assets, all to bolster investor confidence and allow the show and the company’s bold vision to go on.

Drabinsky’s willingness to litigate enforced a libel chill, similar to that associated with former Livent director Conrad Black. He presented himself as a defender of artistic expression: “Censorship is to art as arbitrary authority is to freedom,” Drabinsky told Toronto’s Empire Club in 1994. Yet in 1985, when he learned that a Toronto Star entertainment columnist was criticizing Cineplex’s practice of showing commercials, he found a judge to issue an injunction to pull the column before the next day’s edition. Late that night, the paper had it overturned. He used his huge advertising budget as a lever, says a colleague. “He advertised Phantom even though it was sold out. Maybe it was for the greater glory of Garth. But you’d be hard to find any negative report on Phantom. You’d also rarely see anything negative about Garth.”

In 1995, Toronto investment analyst Alex Winch wrote a letter to Forbes after Drabinsky presented himself as fiscally prudent in an interview: “I am rigorous—rigorous!—on the expenditure of funds in this corporation,” he said, pounding the desk before adding: “This company does not have a flamboyance about it!” Winch, a critic of Cineplex’s accounting, pointed out Livent was consuming more cash than it generated and employing sophisticated accounting techniques to postpone the day of reckoning.

Livent retaliated with a $10-million libel suit. After fighting for a year, Winch settled, agreeing to pay for an apology written by Livent to be placed in select business publications. He also agreed to a gag order that precluded him from discussing Livent for three years, with one exception: “If securities regulators called, I was free to talk to them,” he said. “But they never did.” He figures the case cost him $350,000. By the time his gag order expired, new managers had exposed the accounting fraud and Livent had filed for bankruptcy.

In January 1999, Drabinsky and Gottlieb were charged with 16 counts of securities fraud and conspiracy in New York, where they face up to 140 years in prison and fines of up to $16 million if convicted. A civil suit by the Securities and Exchange Commission came next, followed by OSC charges. Drabinsky responded by calling a press conference, blaming the new Livent management for “motivating American and Canadian authorities to take quick and ill-conceived action against us.”

The duo refused to surrender to U.S. authorities, effectively becoming fugitives from justice. Unbowed, Drabinsky recalibrated his ambitions for a smaller stage, becoming a consultant for his loyal friends, including Conrad Black, Frank Stronach, and Lantos. He organized the “Pamela Wallin Cultural Weekends” at an Ontario resort with various performers, including Diana Krall and the National Ballet of Canada: “You could hear the grunts and groans and see the sweat on the dancers,” says Wallin. “He wanted people to understand what was required to perform.”

In 2002, the year he and Gottlieb were charged criminally in Canada, Drabinsky announced plans to stage a revival of the 1980 British play The Dresser on Broadway. “My intention is not to wither and die but to keep working,’’ he told the New York Times, insisting that he expected no trouble finding financial backers and mounting the production from afar through a general manager.

His ambitions found fuller expression at Visual Bible International Inc., a former uranium company traded in the U.S. over-the-counter market that produced Christian Bible-themed DVDs. Drabinsky and Gottlieb were hired in 2002 to produce The Gospel of John. Then-chairman of the board, Steven Small, a Toronto dentist, was concerned about their involvement, but Drabinsky charmed him into a 15-minute meeting to which he and Gottlieb showed up with 20 huge three-ring binders. “They spent three hours showing me point by point how they were innocent,” says Small. “He persuaded me.”

Soon, however, the film was dramatically over budget, Small says. Nothing was tendered: “A job for half a million went to the person Garth thought was the best.” Several production accountants quit.

Drabinsky persuaded the board the film should have limited theatrical release in movie houses. “He became convinced he could win an Oscar,” says Small. Ever the showman, he wanted to generate buzz with a $500-a-plate charity gala, inviting religious thought leaders. Concerned the plans were beyond the reach of the company, Small resigned.

The Gospel of St. John, narrated by Plummer, premiered at the Toronto film festival to critical praise, though DVD sales were sluggish, in part because of competition from Mel Gibson’s blockbuster The Passion of the Christ. Still, Drabinsky and Gottlieb were lined up to produce the Book of Mark. Then came another lawsuit, launched by Visual’s former chief financial officer, that alleged the two were in “de facto control over the business and affairs of [Visual Bible]” and exercised “power and authority as if they were directors or officers.” Drabinsky laughed off the lawsuit as “a joke.” In 2004, the RCMP launched an investigation into whether Drabinsky and Gottlieb’s involvement was in violation of their bail agreement, which forbade them from serving as a director or officer in any public company. Soon the matter was moot: the company filed for bankruptcy protection in April 2005.

Months later, Drabinsky staged another, more personal event: his wedding to Elizabeth Winford at Toronto’s Four Seasons hotel, attended by old Broadway colleagues, including Plummer, Chita Rivera and director Hal Prince. The next year, Drabinsky sold his reality show Triple Sensation to the CBC, pitched as a cross between Bravo!’s Inside the Actor’s Studio and the audition scenes in the movie Billy Elliot. Drabinsky is executive producer and a judge on the show, which features 12 young contestants competing for a $150,000 performing arts scholarship.

Drabinsky expressed confidence he’d be vindicated, says one friend: “He said, ‘Don’t listen to the Crown’s case. Listen to the defence. They’re going to blow them away.’ ” Drabinsky declined to be interviewed, but friends say despite his remarkable resilience, the past decade has broken him. “This is a man who has been subjected to 10 years of intensive torture,” Lantos says. “He has been stripped of his dignity, of all of his assets, of his liberty to leave the country, his reputation, of every penny he’s ever had and has had to live off the largesse of friends. So of course he doesn’t have the same bluster he had 15 years ago. Far from it. This has managed to break him long before the judge found him guilty.”

Yet some bluster remains. In January 2008, just months before his trial began, Drabinsky sued Triple Sensation producer Alex Ganetakos when she left to pursue another project. The two had a harmonious working relationship. “Alex knew how to manage Garth, and stop people from walking out,” says someone close to the show who compares Drabinsky’s behaviour to that of a spurned lover: “It’s ‘you’re deserting me and I’m going to punish you for it’ or ‘you’ve chosen someone over me and that can’t be done.’ ” Pride fuels everything with Garth, remarks a former colleague. “And the underbelly of pride is shame: he demands everyone look up at him because otherwise they’d be looking down at him.”

The prospect of a permanently grounded Drabinsky, of course, is at odds with his own self-mythology. As he concludes in Closer to the Sun: “It never stops, I just never, ever stop.” Sentencing arguments begin next week; Drabinsky and Gottlieb each face a maximum 34 years in prison. Were this any other story, it would end there. But the phantoms from this opera live on.

Update: Drabinsky and Gottlieb’s three-day sentencing hearing has been deferred until June 3.