Deloitte & Touche is facing a $450 million lawsuit filed by the bankruptcy receiver for defunct entertainment company Livent, the National Post reported Friday.
The paper said the lawsuit was filed three months ago by Roman Doroniuk, a special receiver appointed by Ernst & Young.
The Post says the lawsuit alleges negligence, breach of duty, breach of fiduciary duty, and.or breach of contract on the part of Deloitte & Touche. Documents filed by the receiver reportedly claim Deloitte & Touche failed to uncover financial and accounting irregularities at Livent, and that Deloitte signed off on Livent financial statements that it knew were "materially false and misleading".
None of the lawsuit's claims have been proven in court. Deloitte & Touche has not filed a formal statement of defence, but a spokesperson said the company would defend itself "vigorously".
Deloitte & Touche was Livent's auditor while also performing consulting work for the entertainment company. It was this kind of arrangement that has come under fire in the U.S., where accounting firm Arthur Andersen performed both functions for the failed energy trading giant Enron.
This isn't the first lawsuit Deloitte & Touche has faced over the collapse of Livent. Former Livent boss Garth Drabinsky sued Deloitte last year. And it's just the latest chapter in a long legal quagmire of lawsuits, counter-suits, charges and counter-charges that would be worthy of its own Broadway drama.
- FROM June 8, 1999: Drabinsky says he was too busy to go over Livent books
Soon after the collapse, the new management of Livent filed a $225 million lawsuit against Drabinsky and Myron Gottlieb, the two Canadians who founded the theatre company.
Livent then fired Drabinsky and Gottlieb, saying they "fraudulently manipulated" financial records to hide losses of $100 million. Livent also filed for bankruptcy protection, citing debts of $334 million.
Drabinsky and Gottlieb fired back with a $210 million lawsuit of their own, denying any wrongdoing. Their countersuit alleged Livent's new management a team headed by former Walt Disney executive Michael Ovitz and New York investment banker Roy Furman conspired against them by trying to discredit their reputations.
The Drabinsky/Gottlieb countersuit alleged the Ovitz team deliberately focused on accounting wrongdoing to drive down the value of the company in order to win control.
- FROM Jan. 13, 1999: Former Livent execs face indictments
FROM CBC Infoculture:
Drabinsky fights back
Livent produced such hits as Kiss of the Spider Woman, Ragtime, and Phantom of the Opera.