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Livent ISU

livent stuff

Tim Dang

on 1 June 2011

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Transcript of Livent ISU

By Tim Dang & Michael Kainth Scandals Accounting Impropriety Livent was facing major losses and needed to keep their shareholders and investors
In order to satisfy them, Drabinsky and Gottlieb made the decision to overstate their assets and revenue
they abused the power of their CFO: Maria Messina
they ordered her to make false financial statements and transactions
This eventually backfired: January 1999, Maria pleaded guilty to Fraud and was sentenced to 5 years and charged with $250 000 Garth Drabinsky scammed major investors out of their money by stating that the company was in a good standing condition

They submitted false information on their income statement saying that Livent was doing well financially

Myron Gottlieb had a background in accounting, which made him capable of modifying the company's financial statement

They also scammed 2 Livent vendors into submitting invoices for Livent's charged without the company's name registered

Garth Drabinsky was sentenced to 7 year in prison while Myron Gottlieb went for 6 years Livent = Live Entertainment Corporation of Canada Inc.
Founded in 1989 by Garth Drabinsky and Myron Gottlieb
Livent was became famous for musical productions
Livent's success followed up on their entry in the Toronto Stock Exchange
In 1997, Livent lost $42 million and was facing bankruptcy
November 1997, Livent declared bankruptcy and claimed a debt for $334 million
The government became suspicious and ordered for an audit! Corporate Overview Evading Detection to avoid being detected by the authorities, they would submit financial statements with false information that was made to look believable
Garth Drabinsky hired accountants that were willing to
they were also able to keep the scandal a secret by offering the Livent accountants a high paying salary GAAP's Affected Revenue Recognition Convention revenue must be recorded in the accounts at the time the transaction is completed and it must be taken into the accounts properly
Livent overstated their revenue using false/fraudulent accounting techniques
This is a violation of this GAAP and was dealt with in court against the Securities and Exchange Commission Recommendations plan things out more carefully (Accounting System)
think of the consequences and how to avoid them
#1 Rule = hire trustworthy employees
Another important rule: treat the employees with respect to avoid dispute
tell the truth about the company's financial status from the start or else..
All of these are an excellent start to following the GAAP's correctly Drabinsky and Gottlieb violated this GAAP by withdrawing $4.6 million from Livent
They used a technique called "cooking the books"
They made a complex misrepresentation of their income and assets to make it look like nothing was taken out
This also was a violation of the Consistency Principle Business Entity Concept Effects Consistency Principle The Consistency Principle states that the company must use the same accounting methods and procedures from period to period Major investors lost a great deal of money due to large investments
Stockholders lost their money in the Livent stock because the company went bankrupt
Creditors suffered a loss from Livent because didn't have the ability to collect their money/assets
Livents collapse had a detrimental effect on the economy because many jobs were lost
The government was also affected because they had to support the unemployed workers of Livent with welfare and other funding programs
Customers were not affected as much, but the collapse of the company may have impacted those that enjoyed and tend to go see live theatrical entertainment
It also affected the way the government monitors other businesses Full Disclosure Principle all information needed for a full understanding of a company's financial statements must be included
some of these statements may include tax disputes, lawsuits, and company occupations
When Livent was going bankrupt they were getting many sued by creditors because they couldn't pay some of them off
The Executives of Livent made a strong effort in keeping this information away from investors
This violation doesn't directly affect any "accounts"
Full transcript