Aug. 5 (Bloomberg) -- Ex-Producer Garth Drabinsky was sentenced to seven years for defrauding investors in the Toronto-based production company Livent Inc. His former partner, Myron Gottlieb, received a six-year term.

“Corporate fraud such as this results in tangible losses to employees, creditors and investors,” Judge Mary Lou Benotto in Toronto said today at the sentencing. “It fosters cynicism. It erodes public confidence in the financial markets.”

Drabinsky, 59, was Livent’s dominant executive, the judge said in explaining the different sentences. Gottlieb, 66, “lost everything, including his ability to make a living,” she said.

The men will appeal the sentences and convictions, defense attorney Edward Greenspan told reporters after the sentencing. They are free on bail, he said.

The maximum prison term for the company co-founders was 14 years. The government asked for eight to 10 years. The defendants asked for no prison time, suggesting they be required to visit schools to lecture about their experience.

At an earlier court session, Benotto heard pleas for leniency from former politicians, writers and actors including Christopher Plummer.

The men founded Livent in 1990, expanding it into North America’s biggest theatrical producer.

Drabinsky, onetime chief executive officer, and Gottlieb, a former president, were charged in 2002 with lying about company finances for nine years.

Prosecutors said they raised about C$500 million ($466 million) to buy theaters and put on shows that included “Ragtime,” “Fosse” and “The Phantom of the Opera.”

Found Guilty

Benotto on March 25 found them guilty of two counts of fraud and one of forging a document in what authorities called one of the biggest fraud cases in Canadian history.

“The creative success you achieved through your companies was spectacular, but the trial wasn’t about that,” Benotto told the defendants in March. The judge said the men didn’t enrich themselves personally in the fraud.

Productions were nominated for 61 Tony Awards, winning 19 times, according to American Theatre Wing, the awards’ founder. “Kiss of the Spider Woman,” produced by Drabinsky, won three Tonys, including best musical.

Drabinsky and Gottlieb are fugitives from U.S. law, having being indicted in 1999 on similar charges by a federal grand jury in New York. They have refused to appear in a U.S. court. The U.S. has an extradition request on hold, pending the outcome of the trial in Toronto.

Livent Public Offering

Livent, an acronym for Live Entertainment, sold shares in an initial public offering on the Toronto Stock Exchange in 1993. The stock peaked at C$18.25 in 1996, giving the company a market value of C$287 million. Two years later, police started investigating allegations of accounting irregularities and the production company went bankrupt.

Drabinsky and Gottlieb were convicted of falsifying Livent financial statements from 1989 to 1998, while they sold shares, warrants, debentures and senior notes worth C$460 million.

They also obtained lines of credit worth as much as C$60 million from the Royal Bank of Canada, Bank of Nova Scotia and the Canadian Imperial Bank of Commerce.

Drabinsky quit as chief executive officer in April 1998, saying he wanted to concentrate on his duties as chief creative officer. Two months later, Michael Ovitz, former president of Walt Disney Co., bought a 12 percent stake in Livent and a new management team took over. Drabinsky and Gottlieb were fired in November 1998.

SFX Entertainment Inc., a unit of Clear Channel Communications Inc., bought Livent’s theaters and rights to productions in 1999 for $98 million. The Clear Channel unit was spun off and now is part of Live Nation Inc.

The case is between Her Majesty the Queen and Garth Drabinsky, P592/06, Ontario Superior Court of Justice (Toronto).

To contact the reporters on this story: Kevin Bell in Toronto at kbell2@bloomberg.net’ Joe Schneider in Toronto at jschneider5@bloomberg.net.

Last Updated: August 5, 2009 14:39 EDT