Scandal-plagued Cinar Corp. has launched a lawsuit against two businessmen over their alleged involvement in funnelling $125 million U.S. in company money into risky offshore investments.
Cinar is suing John Xanthoudakis, chairman of Montreal’s Norshield Financial Group, and an associate, Thomas Muir, president of Norshield International Ltd., a Bahamian investment company formerly affiliated to companies where the Cinar money was transferred.
Cinar says in the lawsuit that it has been unable to recover more than $40 million U.S. of the money sent to the Bahamas between October 1998 and December 1999. It alleges the activities of Xanthoudakis and Muir contributed directly to damages caused to the company.
The film-and-animation company is asking for $500,000 from the pair to cover lawyers and accountants’ fees as well as damages for trouble, inconvenience and harm to its reputation.
Revelations in March 2000 that the money had been sent to the Bahamas without the knowledge or authorization of Cinar’s board touched off a series of crises at Cinar.
These events culminated in the dismissal of the company’s founders and co-chief executives, Ronald Weinberg and Micheline Charest.
It had also come to light that Cinar had collected Canadian-content tax credits for scripts written by Americans.
Norshield Financial Group in Montreal has in the past attempted to distance itself from the Bahamian operations and downplayed its role in the Cinar transfers.
In an interview with The Gazette in 2000, Xanthoudakis said it was Cinar officials who sought out the Bahamian companies. He was then called upon for advice on the investments.
“Norshield International actually had referred that deal or that transaction … over to us,” Xanthoudakis said at the time. “It was mostly an advisory relationship between Norshield International and their group down there (in Nassau) and myself over here.”
But according to Cinar’s lawsuit, Xanthoudakis played a crucial role in the Cinar transfers from the beginning. The suit alleges that he approached Cinar executives and introduced them to representatives of the Bahamian investment funds. He is also alleged to have participated in a meeting in the Bahamas between the two sides.
“From the beginning, the defendant Xanthoudakis … was informed and participated in the operation that was put in place,” the suit, filed in Superior Court in late December, says.
Cinar transferred the money to a company affiliated to Norshield International called Globe-X Management and from there it was invested in a third company called Globe-X Canadiana, the suit states. All three Bahamian companies operated from the same address in Nassau and Muir was an executive of all three firms, the suit states.
The lawsuit says Xanthoudakis informed Cinar’s auditors by letter in January 1999 that the company’s money had been invested in high-grade bonds of such companies as Dupont, IBM and General Motors Acceptance, the suit states. A similar letter was sent by a representative of Norshield International to Cinar’s auditors in January 2000.
In fact, the lawsuit says, the bonds were used as collateral to borrow money that was then invested in risky investments in Globe-X Canadiana Ltd.
“(Xanthoudakis) couldn’t have been unaware that Cinar was a public company and that the sums transferred and invested at risk in Globe-X Canadiana Ltd. were highly prejudicial operations for Cinar and its shareholders,” the lawsuit says.
Mystery still surrounds what motivated former Cinar executives to move the equivalent of one year’s worth of Cinar revenue offshore. A fraud investigator hired by Cinar’s new management alleged in an affidavit in 2000 that the Bahamian companies structured the investments so as to hide their true purpose.
Muir, a former Montrealer who, before moving to Nassau, acted as a consultant to Norshield Financial Group, is criticized in the lawsuit for participating in the Cinar investments and for signing an October 2000 agreement promising that Cinar’s money would be repaid when he should have known that it wouldn’t happen.
In a separate lawsuit, Cinar is suing Weinberg and Hasanain Panju, Cinar’s ex-chief financial officer, for $88 million over the offshore investments. It is also seeking to liquidate the assets of Globe-X, which has changed ownership.
Xanthoudakis’s lawyer said the lawsuit against his client will be aggressively defended.
“My client’s position is that the suit is groundless and borders on abusive,” Robert Torralbo said.
Muir’s lawyer couldn’t be reached for comment.
By Don Macdonald, The Montreal Gazette
