That was then. Last week the outlook changed considerably. As accountants swarmed over Livent’s books, the flamboyant showman who put splash, cash and social comment into musical theater disappeared behind a spokesman. To theater folk, Livent is Drabinsky–and if he’s in trouble, the reverberations will be felt from coast to coast.
According to the new team that took control of Livent in mid-June, “serious irregularities” in Livent’s finances have come to light. The team–headed by former Hollywood superagent Michael Ovitz and banker Roy Furman–accuses Drabinsky of keeping two sets of books. Its accountants say Livent has overstated its earnings by “millions of dollars” and will have to restate results for 1996, 1997 and the first quarter of 1998. Drabinsky and his partner, Myron Gottlieb, have been locked out of their offices; Canadian securities regulators are investigating the company, stock trading has been halted and shareholders are revving up class-action suits. David Weiner, a spokesman for Drabinsky and Gottlieb, denies that there were two sets of books and calls the charges “vague allegations.”
Drabinsky has long been famous for his big ideas and big spending. In 1989 he was dismissed from Cineplex Odeon, the movie-theater chain he cofounded, leaving the company awash in debt. For Livent, he built lavish theaters–including the $30 million Ford Center for the Performing Arts in New York’s refurbished Times Square–and turned out extravagant productions. To bankroll his empire, he took Livent public in 1993. Last year the company spent $60 million on development, mostly for road productions of “Ragtime”–and posted losses of more than $30 million. Enter Ovitz. When he took over the struggling Livent, he moved Drabinsky to a purely creative role.
One source close to the new team alleges that Drabinsky made “handshake deals that were never put on paper,” selling foreign rights to plays that were never produced. “He booked the deals as revenue,” says the source, who also charges Drabinsky with spending some $10 million promoting “Ragtime” before the Tony awards, then listing the expenditures as capital improvements to the theater so they wouldn’t be charged against earnings. “There were notes in the margins of documents saying, “Don’t show to the new investors’,” says the source.
Weiner, speaking for Drabinsky and Gottlieb, says Livent’s financial statements “fairly reflected the financial position of the company” at the time of the sale. “The accusations make no sense,” he says. “If there was a suppressed financial situation, why would Mr. Drabinsky hand over control of the company to savvy, hard-nosed New York financiers?” A source close to Ovitz and Furman says they knew about Drabinsky’s “profligacy” when they bought into Livent, but not about the allegedly murky bookkeeping. Some observers think Ovitz and Furman planned all along to run the company themselves, but the source denies it.
Drabinsky’s future at the company is uncertain, but Livent without its idea man is hard to imagine. It was Drabinsky who resurrected “Kiss of the Spider Woman” and rounded up such creative forces as E. L. Doctorow, the Dr. Seuss books, the late Bob Fosse and Alfred Uhry (“Driving Miss Daisy”) for new projects. At Lincoln Center Theater, which is coproducing a new musical, “Parade,” with Livent, executive producer Bernard Gersten says Furman has assured him Livent will go forward with its commitments. But Ovitz is best known for power plays, not stage plays. Some theater people wonder if he’s more interested in Livent’s real estate than its shows. “The question now is whether this is a live theater company, or a company in the arena business,” says Douglas Urbanski, a Broadway and Hollywood producer. For the moment, it’s a company in the housecleaning business. Theatergoers will just have to wait for the next act.
