On Wednesday, February 23, 2000, CINAR Corp., the creator of the Emmy
Award-winning ARTHUR, had a lawsuit filed against the company alleging they
artificially inflated its financial results by lying about the use of
Canadian tax credits. As reported [AF 10/19/99], allegations surfaced last
fall that CINAR only pretended to use Canadian authors for its scripts in
order to obtain tax credits. Canadian officials are investigating but no
charges have been filed. The early rumors sent CINAR stock plummeting to
nearly half of the company's market value. At first CINAR said the
allegations would not have any material impact, however on Friday, February
18, the company warned investors the impact would be more severe than first
thought. By close of the Monday stock exchange day, CINAR's stock had
dropped nearly 23%. CINAR's class B shares were CA$8.25 lower at CA$28 on
the Toronto Stock Exchange at mid-day on Monday, while on the Nasdaq, they
were down 1-1/4 at 24-5/8 in mid-day trading. The announcement quickly
prompted Milberg, Weiss, Bershad, Hynes & Lerach, a New York law firm
representing disgruntled shareholders, to file suit against the
Canada-based company. The lawsuit also alleges CINAR raised more than $150
million through equity financing in the last 12 months, "without
disclosing. . . .the adverse facts." CINAR's officials said they intend to
fight the lawsuit "vigorously." The company has already said it did not
expect its tax-credit imbroglio to cripple its financial strength or
liquidity. On Thursday, CINAR's shares were unmoved at $18-7/8 on the
Nasdaq, and down CA$0.25 at CA$26.75 on the Toronto Stock Exchange.
Rick DeMott
Animation World Network
Creator of Rick's Flicks Picks
