Cinar's Auditors Resign
Embattled Montreal-based Cinar Corp. has announced that its self-imposed auditor, Ernst & Young, has resigned due to the company's failure to produce key information about possible fraud and other illegal acts at the animation production house. Due to the fact that the auditor will not sign off, Cinar will release unaudited versions of its reworked financial statements from 1997-1999. The company intends to release these long awaited documents to investors sometime during the week of Monday, January 29, 2001. Ernst & Young officially resigned after Cinar executives said they could not produce accurate findings on fraudulent actions at the company until at least the completion of fiscal 2001. Cinar said in a statement, "In order to be audited, the financial statements of the company must be the subject of representations from management related to certain matters, including whether any illegal, fraudulent acts or related party transactions exist and, if so, have been adequately reflected. As indicated above, new management of the company has determined that, at the present time, it cannot provide the required assurances with respect to financial periods prior to its appointment." Without audited statements, Cinar will have little hope of being relisted on the Nasdaq and Toronto Stock Exchanges or assuring possible buyers of their financial stability. New Cinar management took over after founders Micheline Charest and Ronald Weinberg were fired after an investigation pointed fingers at the couple being involved in securing illegal tax credits and investing US$122 million in offshore accounts without board approval. Currently, these and other illegal actions are under investigation by the Royal Canadian Mounted Police. In December, Cinar Corp. announced that it had finally come to settlements with Canadian federal and provincial tax officials over the repayment of improperly obtained tax credits. The company had used fake Canadian names on scripts, written by U.S. scribes, to obtain Canadian tax credits.