Livent co-founder Garth Drabinsky seen arriving at the Ontario Superior Court in Toronto in March. Drabinsky and Myron Gottlieb were sentenced Wednesday to prison terms for fraud. (Chris Young/Canadian Press)

Former Livent theatre impresarios Garth Drabinsky and Myron Gottlieb, who presided over a company whose culture "was one of dishonesty," have been sentenced in Toronto to stiff jail terms for defrauding investors.

Drabinsky and Gottlieb, founders of the once-renowned theatre company that is now defunct, were convicted in March of two counts each of fraud and one count each of forgery.

Justice Mary Lou Benotto sentenced Drabinsky on Wednesday in an Ontario court to seven years in prison, and his partner received a six-year term, both for fraud.

Drabinsky received four years on one fraud charge and seven years on the second, to be served concurrently.

Gottlieb got four years on the first count of fraud and six years on the second, also to be served concurrently.

Each man's forgery conviction was stayed.

The men's lawyer said they are appealing both the convictions and the sentences.

'Erodes public confidence'

"No one is above the law," said Benotto in her decision. "No one gets to write their own rules."

The Livent "corporate culture was one of dishonesty," she said.

"Corporate fraud such as this results in tangible losses to employees, creditors and investors. It also results in less tangible, but equally significant loss to society. It fosters cynicism. It erodes public confidence in financial markets."

Benotto said earlier that the pair had "systemically manipulated the books" at their now-defunct Livent Inc. in the mid-1990s.

Defence lawyer Eddie Greenspan said Wednesday he has already filed the appeals.

Both Drabinsky and Gottlieb will remain free on bail until the courts make a decision on the appeals.

The Crown said Drabinsky and Gottlieb directed a scheme to make the ailing company look healthy, while at the same time bilking investors of approximately $500 million.

Livent rose to prominence in the 1990s by producing a string of hits in Canada and on Broadway that included Kiss of the Spider Woman, The Phantom of the Opera and a revival of Show Boat.

Drabinsky became one of the leading lights in the Canadian and American entertainment sector, eventually garnering an Order of Canada for his efforts.

Livent's steep upward trajectory, however, was matched by an equally impressive fall when, in 1998, the firm was sold to a group of American investors, led by Hollywood heavyweight Michael Ovitz.

Ovitz's group quickly discovered the firm was in serious financial trouble.

Within four months, Livent was bankrupt, and New York authorities began pursuing Drabinsky and Gottlieb on fraud charges.

Judge dismisses worker manipulation argument

Ontario officials eventually started their own inquiries into Livent, leading to fraud charges against the two men and a court case that began in May 2008.

The defence maintained the fraud was led by lower-level employees who manipulated Livent's financial statements without the knowledge of either Drabinsky or Gottlieb.

But the judge dismissed that argument.

Drabinsky and Gottlieb also face a 1998 fraud indictment in New York and charges filed by the Ontario Securities Commission.