Cinar Releases Reworked Financial Statements
On Friday, February 2, 2001, scandal plagued Cinar Corp. released their long-awaited reworked financial statements for the past four years. For the year ended November 30, 1998, the company lowered net earnings from CA$21.8 million (US$14.6 million) to $15.7 million ($10.5 million) and for the year ended November 30, 1997, $12.9 million ($8.6 million) to $6.6 million ($4.4 million). Retained earnings for the year ended November 30, 1996 were reduced from $22.4 million ($15 million) to $16.3 million ($10.9 million). For the year ended November 30, 1999, Cinar took a $160.4 million ($107.2 million) loss, mainly due to non-approved investments made in offshore accounts. In 1999, $160.5 million ($107.3 million) was invested into Globe-X Management by now former officers of the company without the board of directors approval. Cinar has since worked with Globe-X in recovering the funds, however $63 million ($42.1 million) is still unclaimed. In a company statement they said, "Globe-X has defaulted on payment schedule agreed to in October 2000 and, although the company is currently in discussions with Globe-X to establish terms for payment of all of the said balance, those discussions have not yet concluded and management of the company believes that it would be prudent to establish an allowance in the full amount of such investments." On January 30, 2001, Cinar announced that they were suing company founders Micheline Charest and Ronald Weinberg and former CFO Hasanain Panju for $28.6 million ($19 million) related to various illegal allocations of company funds. In the suit, Cinar alleges that Charest and Weinberg used funds to pay for house renovations, housekeepers and gardeners, in addition to tuition for one of their son's private school. Panju allegedly paid his wife Sukania $165,000 for no apparent reason. The lawsuit filed in Quebec Superior Court, holds Weinberg and Charest accountable for $7.2 million and Panju for $7.6 million. For the first six months of 2000, the company reported a revenue loss of $14.1 million ($9.4 million) and a net earnings loss of $42.4 million ($28.3 million) from the previous year. Most of the loss was attributed to lower production and library revenues due to the legal and regulatory measures pending against the firm. Cinar also stated that it took a $7.4 million ($4.9 million) loss in interest and penalties paid to federal and Quebec tax authorities to settle alleged tax-fraud allegations surrounding the use of fake Canadian names on scripts written by U.S. scribes. Micheline Charest's sister Helene Charest allegedly received $199,000 in royalties for scripts she didn't write. The reworked statements were unaudited due to the fact that the company could not produce certain documents regarding illegal activities to self-appointed auditor Ernest & Young. Subsequently, the investment firm resigned from their post. This move creates less assurance that the aforementioned statements are 100% accurate and could diminish Cinar's on-going search for a buyer.