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CINAR’s Stock Stops Trading. In the midst of an on-going legal scandal and the departure of its head execs, CINAR Corp.’s stock plummeted CA$18.65 (US$12.86) to CA$8.35 on the Toronto Stock Exchange Tuesday, March 7, 2000. In addition, the stock fell 12-5/8 to a new 12-month low of 5-3/4 on the Nasdaq. Volume was more than 18 million shares on the Nasdaq, far more than usual for the often thinly traded stock. The stock continued to crumble on Wednesday, March 8, 2000 falling nearly 75% off its initial worth at the beginning of the trading week. In turn, the stock was not traded at all on Thursday, March 9, 2000. Market experts waited again on Friday, March 10, 2000 for the company to disclose more information about its problems. With trading not resuming on Friday, CINAR said it will have to restate results for financial years ending Nov. 30, in 1997 and 1998 and for the first three quarters of 1999. "The reasons for such restatements (in 1997 and 1998) relate to tax incentives and the disclosure of related party transactions," CINAR said, adding the decision was made after consulting with the company's auditors. "Furthermore, it also appears likely that the financial information reported for the first, second and third quarters of fiscal 1999 will need to be restated for issues related to tax incentives, disclosure of related party transactions and unauthorized transactions," it said. The company had been worth about CA$1.8 billion (US$1.2 billion) before allegations arose last October that it had illegally obtained Canadian tax credits by claiming Canadian authors had written scripts actually scribed by U.S. writers. The new bottoming out of the stock came in response to the resignation of co-founders, Micheline Charest and Ronald Weinberg, and the firing of Chief Financial Officer Hasanain Panju, after $122 million of the company's funds had been invested without board approval. Upon the news of the plummeting stock, Charest and Weinberg made the following statement: "The past several months have been extremely difficult for CINAR. Since we founded the company over 20 years ago, and in large part because of the talents and dedication of an extraordinary group of employees, the Company has repeatedly overcome the challenges and seized the many opportunities in the education and entertainment fields. Over the past few months, however, it has become clear to us that CINAR's latest series of challenges, combined with the ever-growing demands of our business, required that a series of steps be taken to strengthen our senior management group. A number of those changes were announced on Jan. 20, 2000 when Peter Moss was appointed to the newly created position of President of CINAR Entertainment, and David Ferguson was promoted to President of CINAR Europe. They, together with Steve Carson, the President of CINAR Education, bring extraordinary depth and talent to our Company. We are lucky to have them as colleagues. Yesterday's addition of Barry Usher [as president and CEO] will hopefully complete this process of management change and growth and will strengthen the financial and administrative side of the Company. The Board has asked us to continue to play a strong leadership role in CINAR's business. We have agreed to devote all of our talents and energies to the business of the Company. As major shareholders and directors we continue to have important duties and responsibilities to the Company. More importantly, as the founders of the Company, we are totally committed to our shareholders, our many loyal employees, and our customers and supporters throughout the world. We strongly believe that there are still many challenges, but even more opportunity ahead for CINAR. We intend to do everything we can to help the company move forward today and in the future." A source close to CINAR told Reuters that Charest and Weinberg have remained as directors, despite pressure on them to leave the company completely. With CINAR’s future not looking so bright, rumors of a sale have been floating. The Emmy Award winning producers of Arthur hold a large library of children’s programming and a 20% stake in cartoon channel Teletoon. Many companies worldwide would love to control CINAR’s content, but for the company to preserve its Canadian federal and provincial tax credits effective control must remain in Canadian hands.

CINAR Strikes Back. After allegations of fraud, misallocated funds, shareholder lawsuits, executive shuffling, plummeting stock prices and subsidy suspension, CINAR Corp. said Monday, March 20, 2000 that it had filed a law suit against several companies believed to be connected with the US$122 million in unauthorized investments. This announcement comes after the Canadian Television Fund (CTF) and Telefilm Canada, which provide the main source of public funding for Canadian producers, suspended money to the producers of such shows as the Emmy Award-winning Arthur until full disclosure was given about the company’s financial problems. CINAR’s spokeswoman Suzan Ayscough said, "We are committed to providing clear answers to key issues." To end the now 11-day halt on the trading of CINAR stock, Toronto Stock Exchange and Nasdaq officials also await a conclusive report on the company’s mounting problems. Ayscough said the company would provide a complete list of answers no later than April 14, 2000. The new suit helps CINAR shed more light on the dark shadow hovering over the animation house. Filed in the Supreme Court of the Bahamas, the suit is the company’s first aggressive step to recover all the money and obtain increased information about the nature of the non-board-approved investments. "Based on our findings, we have determined that these proceedings are required to protect the interests of the company," CINAR Chief Executive Barrie Usher said. The three companies and one individual listed in the lawsuit are Norshield International Ltd.; its affiliates Globe-X Management Ltd. and Globe-X Canadiana Ltd.; and Robert Daviault, an officer of Globe-X Management Limited and/or Globe-X Canadiana Limited. The Bahamas-based Norshield International is a unit of Montreal-based Norshield Financial Group, which specializes in merchant banking and asset management. CINAR said it learned last month that about $122 million had been transferred without the board's authorization to Norshield International, where it was used to buy investment grade securities. The company tried to recover the money, but on March 3 found that the funds were held by Norshield affiliate Globe-X Management, which had used $86 million to purchase commercial paper from its affiliate Globe-X Canadiana. "They (CINAR management) have also been attempting to ascertain the underlying value of the commercial paper of Globe-X Canadiana, but management of Globe-X Management and Globe-X Canadiana have consistently refused to provide any substantive information with respect to the nature or value of the assets and liabilities of Globe-X Canadiana," CINAR said. As of Friday, March 17, CINAR said it had regained about $46 million of the missing money, while Globe-X management allegedly commands roughly $76 million in commercial paper issued by Globe-X Canadiana. The names of the companies involved were not released earlier in fear of breaking down talks between CINAR and Norshield.