Of what are you so afraid KPMG? Don't do it Judge!

Secrecy swirls around Myron Gottlieb trial

KPMP LLP and KPMG Forensic Inc. plan to ask a judge to take the rare step of excluding the public from trial

Jacques Gallant/Staff Reporter
Tuesday, November 10, 2015


Livent co-founder Myron Gottleib arrives at the Superior Courthouse in Toronto in March 2009. (Chris Young/The Canadian Press)

One of the world’s biggest audit firms is taking former theatre mogul Myron Gottlieb to court.

Why? It’s a secret.

Not only is the court file sealed, but KPMG LLP and KPMG Forensic Inc. plan to ask a judge to take the rare step of excluding the public from the trial, which is set to begin in Toronto on November 30.

Why the secret trial? That’s a secret, too.

“We do not comment on matters before the court,” is all that a spokeswoman for Dentons, the law firm representing KPMG, would tell the Star.

What is clear is that Gottlieb, co-founder of now-defunct Livent Inc. who is representing himself in court, is not happy about the layers upon layers of secrecy. He will be arguing against the application to exclude the public on November 24.

“From my perspective, the issue in the dispute relates to my freedom of speech and the attempt of KPMG to silence me,” he told the Star, adding he can’t say much more due to an injunction. “I consider the issues to be a matter of public interest. And I am upset that my rights so far have been determined in secret and that KPMG seeks to have a claim that it has brought against me tried in secret.”

The lack of openness is concerning, say legal experts, who highlight that the Canadian justice system is based on the principle that the public has a right to know what is taking place inside the country’s courtrooms.

“This is echoes of Star Chamber type trials that are done in complete secrecy,” said lawyer Iain MacKinnon, who is not involved in the case. “It’s quite astonishing that someone would ask for an entire trial to be sealed.”

MacKinnon pointed out that KPMG’s legal team would have to meet a high threshold to convince a judge to order such an extraordinary measure.

Gottlieb and Livent co-founder Garth Drabinsky were convicted of two counts each of fraud in a scheme to falsify financial statements so they could lower expenses. Gottlieb was granted full parole in 2013 after serving 11 months of his four-year prison sentence.

Livent, behind such hits as Phantom of the Opera, filed for bankruptcy soon after the fraud was discovered in 1998. Its demise is estimated to have cost investors about $500 million.

Gottlieb, 72, and KPMG have had run-ins in the past. Gottlieb sued the company, law firm Stikeman Elliot, Michael Ovitz, which owned a controlling stake in Livent, and several Livent employees for more than $60 million, alleging they were involved in a conspiracy to falsely accuse him of fraud. (KPMG had conducted the initial investigation into accounting issues at Livent.)

The Ontario Court of Appeal upheld a lower court ruling in 2009 that Gottlieb’s statement of claim should be struck because the criminal proceedings against him were ongoing and a determination had not yet been made as to whether he was guilty or not guilty of fraud. He did not pursue the lawsuit after his conviction.

Lawyer Brian MacLeod Rogers says that while civil cases may appear to some people as private affairs between the individuals involved, the proceedings must be just as open and transparent as in criminal proceedings.

“We have a public court system, not a private court system,” he said. “Justice must be seen to be done in civil cases, just as in criminal cases.

“The Supreme Court of Canada and every aspect of our system make it clear that such proceedings should be as open to the public as possible.”

Secrecy has long been a problem in what is supposed to be an open court system, but there have been signs of progress this year, as several Ontario judges have begun cracking down.

In January and February, two Brampton Superior Court judges in separate cases sided with the Star and other media in a fight to lift publication bans on the names of parents and the children who died in their care. In the case of Nandini Jha, who a jury convicted of manslaughter in the death of 3-year-old daughter Niyati, Justice Deena Baltman wrote:

“Without the names of the accused and the victim, it is more difficult to engage the public and encourage informed debate about the issues at play … And it erodes the open court principle that is fundamental to maintaining citizens’ confidence in the justice system.”

In September, Toronto Justice Ian Nordheimer ruled that an individual who wanted to pursue a legal challenge against Toronto police using only his initials must first notify media outlets, in case they wanted to challenge the application.

In his ruling, Nordheimer also lamented the fact that Ontario still does not have an online process for notifying media every time a publication ban or other restriction on court proceedings is being requested, unlike provinces such as Nova Scotia and British Columbia.

As it stands now, the media is sometimes notified of publication bans and other restrictions, but other times not.