Two Canadian theatre moguls behind some of the biggest Broadway musicals in the world found themselves behind bars for the first time after the Ontario Court of Appeal refused to overturn their fraud conviction on Tuesday.

Myron Gottlieb and Garth Drabinsky will serve shorter sentences but both remain guilty of their crimes, the court ruled.

The two men were found guilty of fraud in 2009 in relation to business dealings with their company Livent Inc.

Their attempts to convince the Ontario Court of Appeal to overturn their convictions netted them shortened sentences by two years each, meaning Drabinsky will serve five years and Gottlieb four.

The trial judge originally ruled that the fraud carried out by Gottlieb and Drabinsky brought down the company in 1998 and resulted in losses of around $500 million.

But the three-judge appeals court panel said it hadn't been proven that the company's collapse, and subsequent losses, were the direct result of the fraud.

"In the absence of evidence from the Crown, it was wrong to attribute the ultimate failure of Livent to the fraud. The causes of Livent's demise were admittedly numerous and complex," the judge's wrote in their ruling.

They added: "The bankruptcy no doubt caused significant losses to creditors, employees and investors. Those losses cannot, in our view, be laid entirely at the feet of Drabinsky and Gottlieb."

Ontario court Judge Mary Lou Benotto presided over the original trial which ended in 2009. The sentence she handed down reflected her finding that Gottlieb and Drabinsky were directly responsible for the losses of hundreds of million of dollars to investors.

Benotto found they manipulated the books at Livent, which once mounted massive stage hits in Canada and on Broadway, such as "The Phantom of the Opera" and "Showboat."

Livent became North America's largest live theatre company in the 1990s, started after Drabinsky and Gottlieb were ousted from Cineplex Odeon, which they established in the 1980s.

Gottlieb and Drabinsky had appealed both the guilty verdict and their sentencing, arguing that the fraud was executed by other Livent employees without their knowledge.

"The conviction appeals are dismissed," stated the ruling on Tuesday. "The sentence appeals are allowed and the sentences varied in accordance with these reasons."

Drabinsky was represented by Edward Greenspan, who told The Canadian Press it is too early to decide whether they would seek to appeal the judgment to the Supreme Court of Canada.

Greenspan said he will have to meet with his client to go over the options.

"Right now he remains in custody until we decide if and when we are going to appeal," Greenspan said of his client. "And then we will seek bail pending that application to the court – but first we have to conclude what we're going to do."

Over the weekend, Drabinsky was seen at a Toronto International Film Festival luncheon and at the premiere of "Barrymore," a film he produced starring Christopher Plummer.

With files from The Canadian Press