Blogs & Comment

Livent: “Papering the (court)house”

During the cross examination of Peter Kofman yesterday, lawyers for both Garth Drabinsky and Myron Gottlieb spent a considerable amount of time asking the former Livent engineer if he was aware of the term “papering the house.” The term refers to the practice of theatre — or any other live entertainment companies — of giving away free tickets to ensure a full house. It was a practice that Kofman became an unwitting and reluctant participant in after Livent charged more than $1 million worth of tickets to the company’s Los Angeles production of Ragtimeto his engineering company and on his personal credit card.

But Kofman wasn’t biting. He looked perplexed when Gottlieb’s lawyer Brian Greenspan asked him if he was familiar with the phrase and was equally adamant when Drabinsky’s lawyer Eddie Greenspan quizzed him on the same term. Eddie Greenspan seemed incredulous and pressed him on it since — after all — he had been intimately involved with Livent for years. But Kofman wouldn’t budge. “It was not an expression I would have used or heard,” he told the court. “I was not in the theatre business. I was in the construction business.”

But Eddie Greenspan pressed on. Standing at the podium in the centre of the courtroom and clutching a copy of a book entitled “Creative Arts Marketing,” he asked whether Kofman knew how to use a computer? If so, why hadn’t he spent some time on the Internet looking up the term? Had he done so, within “two minutes” he would have found well-respected sources like Harvard University discussing how common and important the practice of giving away free tickets can be in the theatre business, Greenspan told the court.

The implication, of course, is that prosecutors got it all wrong when they allege that the free tickets given away to its Los Angeles production of Ragtimewas a fraudulent means to prop up the profitability of the show. Had the crown spent some time on “the Google” they would have found that Livent was merely engaging in a time-honored tradition of giving away comp tickets to generate good word-of-mouth for the show. And he’s got a point. After all, just about every company gives away some of its product for free or at a sizable discount in an effort to generate enough buzz to ultimately boost sales.

The problem comes with how the company accounts for that discounted and free product on its books and to its shareholders. I’m not sure Harvard University would approve of forcing suppliers to unwittingly buy thousands of theatre tickets and then demand they submit bogus invoices purporting to work on the company’s capital projects in order to get paid.