By: John Gray
The evidence against Livent founders Garth Drabinsky and Myron Gottlieb is “overwhelming” and the defence’s contention that the two executives are the victims of an elaborate frame-up is “preposterous,” prosecutors said in their final oral argument presented in court today.
Throughout the six month trial, defence lawyers Edward and Brian Greenspan have insisted that Drabinsky and Gottlieb knew nothing about the financial manipulations that began almost from the start of the live theatre company and continued for more than eight years. The defence insists that Gordon Eckstein, the company’s senior accountant, conducted the fraud himself and members of the accounting staff, new Livent managers, lawyers and others, conspired to frame the executives. But there is another explanation—a simpler and more logical explanation—insists crown lawyer Amanda Rubaszek. “The accused did it,” she told the court. “There is no conspiracy. The evidence is what it is.”
Rubaszek mocked the defence claims that the mountain of documents that indicate Drabinsky and Gottlieb knew about the financial manipulations were planted by members of the so-called conspiracy and that handwriting on those documents—that has been identified as Drabinsky’s—either belonged to someone else, or was forged. “It doesn’t make sense—none of it does. It’s speculation on the part of the defence who are trying quite desperately to distance themselves from some very incriminating documents.”
If new Livent managers brought into the company by former Hollywood mogul Michael Ovitz cottoned on to the fraud after just five weeks at the company, how could Drabinsky and Gottlieb not realize their books were cooked after running the company for more than eight years, Rubaszek asked. It is not believable that the Livent founders were unaware of the actual financial state of their company. Gottlieb, who signed every company cheque and has been described as an “astute cash manager,” should have seen this clearly, Rubaszek said. “He ought to have been stunned to have seen expenses being far lower than the amount of the cheques he was signing,” she said.
The defence has argued that Justice Mary Lou Benotto should not believe Eckstein’s testimony and have suggested that the accounting manipulations may have been the result of his incompetence. But it is “ridiculous” to suggest that Eckstein handled the manipulations on his own, and if he was incompetent, why wasn’t he fired until after new Livent managers took control of the company, Rubaszek argued. “Our submission is that he was needed by the accused. He was an integral link … and he kept the accused sufficiently insulated from the manipulations,” she said.
The assertion that Eckstein was solely responsible for all of the accounting manipulations flies in the face of logic and the evidence when it comes to the fraudulent manipulations undertaken when Livent was a private company, says prosecutor Alex Hrybinsky. In 1990 Gottlieb initiated a “kickback scheme” in which two Livent construction suppliers were instructed to pay the Livent founders millions of dollars for business services that were never supplied. The construction companies were repaid after submitting false and inflated invoices for construction work that had not been done. Those invoices were ultimately booked to Livent’s balance sheet where they inflated the company’s value by $6-8 million at the time of its initial public offering in 1994.
While the defence has not disputed that Drabinsky and Gottlieb did in fact engage in the “kickback scheme,” they insist the money was used for business purposes and that that it was Eckstein who inappropriately booked the false construction invoices. But that’s impossible, argues Hrybinsky, since only Gottlieb and Drabinsky knew the true nature of the invoices. “Eckstein would have had to have the scheme explained to him,” he says. “There is no evidence the accused told him to do anything different.”
But Justice Benotto may have thrown a wrinkle in the prosecution’s case when she asked prosecutors to comment on the defence assertion that Livent’s books were not really over-valued at the time of its initial public offering. The defence has suggested that Livent’s books were actually undervalued at the time of the IPO since the value of the Pantages theatre in Toronto was actually understated in the company’s financial prospectus. But that is a specious argument, Hrybinsky said. “Publicly filed documents are supposed to be truthful. In this case, they were deliberately untruthful,” he told the court. “You can’t say there are false bookings on our balance sheet, but that’s okay because they are more than offset by this theatre value so there is no need to tell anyone.”
Chief Crown Prosecutor Robert Hubbard spend much of his time trying to deflate the defence argument that the witnesses cannot be believed because of a single disputed meeting in April 1998 where both Eckstein and Livent controller Chris Craib said Drabinsky openly discussed financial manipulations. The defence contends that Drabinsky could not have attended the meeting (he was having lunch with then-U.S. President Bill Clinton—although he was in the office later that day) and thus the witnesses are lying.
Whether Drabinsky was at that April meeting or having lunch with Bill Clinton is immaterial, Hubbard argued. Drabinsky’s own daytimer shows he attended at least seven separate meetings to discuss the preparation of Livent’s year-end financial statements in the weeks prior to that controversial meeting. Prosecutors pointed out more than a dozen documents—some with Drabinsky’s handwriting—produced for those meetings that showed that Livent was contemplating more than $22 million in financial manipulations. Many of those documents were seized from Drabinsky’s own office. “This shows how long and involved this process was,” Hubbard told the court. “And this period is no different from any other period at Livent.”
If the judge has any doubt that the handwriting on the documents is that of Drabinsky, she can simply compare it to the 10-page handwritten love letter Drabinsky wrote to his “mistress.” The same letter where he complained about the “crushing personal debt” he had been struggling with.
Defence lawyers begin their final oral arguments tomorrow and are expected to take two days to complete.