Lawsuit Against CINAR

files/pictures/picture-35.jpgOn 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.