FOR IMMEDIATE RELEASE 99-3 SEC Sues Livent and Nine Former Livent Officials for Extensive Accounting Fraud; U.S. Attorney Files Criminal Charges Washington, DC, January 13, 1999 -- The Securities and Exchange Commission today sued Livent, Inc. and nine former senior officers, directors, and members of the accounting staff of Livent, Inc. for engaging in a multi-faceted and pervasive accounting fraud spanning eight years from 1990 through the first quarter of 1998. Five individuals are also alleged to have engaged in insider trading. Also today, the U.S. Attorney for the Southern District of New York announced the indictment of former Livent officials Garth Drabinsky and Myron Gottlieb for sixteen felony counts each, for violations of the federal securities laws. In addition, the U.S. Attorney announced that former Livent officials Gordon C. Eckstein and Maria Messina pled guilty to one felony count each, for violations of the federal securities laws. Richard H. Walker, Director of the SEC's Division of Enforcement, said, "Accounting fraud strikes at the heart of the integrity of the securities markets and will not be tolerated by the Commission. This case should send a strong message to officials of public companies that the Commission is on guard for companies that cook the books and when detected we will take swift action." The SEC charges, filed in U.S. District Court in Manhattan, allege that Garth Drabinsky, Livent's former chairman and chief executive officer, and Myron Gottlieb, the company's former president and a director, were the architects of an accounting fraud designed to inflate earnings, revenues, and assets reported by the company in financial statements filed with the Commission and disseminated to the public. As a result of the fraud, Livent made at least seventeen false filings with the Commission that materially overstated the results of Livent's operations and its financial condition. According to the SEC, Drabinsky and Gottlieb manipulated income and operating cash flows with the active participation of several long-time associates, including Gordon Eckstein, Livent's former senior vice president of finance and administration, Robert Topol, the company's former senior executive vice president and chief operating officer, as well as several individuals in the company's accounting department. Maria Messina, Livent's former chief financial officer and former Deloitte & Touche engagement partner for Livent's 1995 audit, also participated in the scheme. Drabinsky and Gottlieb also enlisted the support and assistance of numerous Livent personnel in their far-reaching fraud and solicited assistance from various other individuals and entities to facilitate and conceal the fraud. Also, while in possession of material nonpublic information concerning the fraudulent conduct at Livent, the SEC alleges, Eckstein, Topol, Tony Fiorino, Livent's former theater controller, D. Grant Malcolm, Livent's former senior production controller, and Diane Winkfein, Livent's former senior corporate controller, engaged in insider trading of Livent securities. Penalties Sought: The Commission seeks to permanently restrain and enjoin Drabinsky, Gottlieb, Topol, Eckstein, Messina, Winkfein, Malcolm and Fiorino from violating or aiding and abetting violations of the antifraud, books and records, and internal controls provisions of the federal securities laws and seeks civil monetary penalties against them. The SEC further seeks to permanently bar Drabinsky, Gottlieb, Topol and Eckstein from serving as officers or directors of a public company. Finally, the SEC seeks disgorgement, prejudgment interest and Insider Trading Sanctions Act ("ITSA") penalties from Topol, Eckstein, Fiorino, Malcolm, and Winkfein for insider trading. Settled Federal Court Actions: Simultaneous with the filing of the Complaint the following settlements were agreed to: Gordon C. Eckstein: Agreed to not violate the federal securities laws and to be permanently barred from acting as an officer or director of a public company. He did not admit or deny the allegations. Diane J. Winkfein and D. Grant Malcolm: Agreed to not violate the federal securities laws. They did not admit or deny the allegations. Winkfein also agreed to pay $8,137 in disgorgement and prejudgment interest. Settled Administrative Orders: Simultaneous with the filing of the Complaint the following settlements were agreed to: Livent, Inc.: Agreed to cease and desist from committing or causing any violation of various provisions of the federal securities laws and to cooperate with the Commission's ongoing investigation. Livent did not admit or deny the findings. Gordon C. Eckstein: (A Chartered Accountant, the Canadian equivalent of Certified Public Accountant) Agreed to sanctions pursuant to Rule 102(e) of the Commission's Rules of Practice, finding that he engaged in improper professional conduct and willfully violated the federal securities laws. Eckstein agreed to not appear or practice before the Commission as an accountant, with the right to re-apply after five years. He did not admit or deny the findings. Christopher Craib: (Livent's former senior budgeting controller and a Chartered Accountant) Agreed to sanctions pursuant to Rule 102(e) of the Commission's Rules of Practice finding that Craib engaged in improper professional conduct and willfully violated the federal securities laws. Craib agreed not to appear or practice before the Commission as an accountant, with the right to re-apply after three years. Craib also agreed to cease and desist from committing or causing any violation of various provisions of the federal securities laws. He did not admit or deny the findings. Non-Settled Civil Cases: Drabinsky, Gottlieb, Messina, Topol and Fiorino The Commission thanks the U.S. Attorney's office for its cooperation in this matter. The Commission is continuing its investigation in this matter. Details of the Commission's actions are available at: www.sec.gov. For further information contact: Paul V. Gerlach, Associate Director (202) 942-4560 Paul R. Berger, Assistant Director (202) 942-4854 # # #