Drabinsky and Gottlieb are charged with two counts of fraud and one count of forgery in connection with the alleged massive accounting fraud that occurred at the company. Both men have pled not guilty.

At times, a clearly angry and agitated Kofman described how he felt he had no choice but to go along with one scheme that saw his company — Kofman Engineering Services Ltd. — pay Drabinsky and Gottlieb millions of dollars for "introductions" and other allegedly bogus business development work between 1990 and 1993. The second scheme involved Livent's purchase of hundreds of thousands of dollars of tickets to its production of Ragtime in Los Angeles in Kofman’s name in 1997 and 1998. Prosecutors allege that those purchases were made not only to fraudulently make the production seem more profitable than it actually was, but that those payments were improperly recorded on Livent's books as assets, thus improperly boosting the value of the company.

"That's alright," replied chief Livent prosecutor Robert Hubbard. "By the time this is over, you might need a couple more chairs."

The number and intensity of the defence objections should come as no surprise to anyone familiar with Livent or Eckstein's central role in the fraud case. As Livent's chief accountant for most of its turbulent eight year history — and the witness who worked most closely with Drabinsky and Gottlieb — Eckstein is perhaps the prosecution's most important witness. Prosecutors will be relying heavily on Eckstein to closely link Livent's founders to the accounting crimes with which they are charged.

For its part, the defence is hoping to convince Madame Justice Mary Lou Benotto of exactly the opposite: that it was Eckstein who was actually responsible for the wide-spread accounting fraud that allegedly occurred at the theatre company. And the defence has done a yeoman's job of demonizing Eckstein. Defence lawyers got former Livent engineer Peter Kofman to admit that while Gottlieb always treated him in a professional and gentlemanly way, Eckstein was arrogant, tyrannical and so abusive to his staff that he had a hard time getting them to stay with him. He was even known to use racial slurs, Kofman told the court.

None of that alleged temper came out today. And so far, Eckstein's testimony has not disappointed prosecutors. Less than 15 minutes into his examination, Eckstein was asked to review the routine assurance company managers include in all their financial filings, stating that the reports represent a fair and accurate representation of the company's financial health. "Were Livent's financial statements accurate?" asked Hubbard. Eckstein leaned into the microphone screwed into the witness stand and firmly stated: "No."

When asked if Drabinsky and Gottlieb knew that the financial statements were inaccurate, Eckstein replied: "They absolutely knew it was false."

Eckstein went on to explain how Drabinsky and Gottlieb ordered him and his accounting staff to fake the company's financial statements in order to hide losses and increase profits. Meetings were held at the end of every financial quarter to go over the company's financial results and compare them to company budgets and financial projections. At each of those meetings, company executives learned that Livent was never as profitable as it had projected. "The actual results were always far lower than the projected results," he told the court. "I was directed by Mr. Drabinsky, Mr. Gottlieb and (former Livent chief operating officer) Mr. Topol to make changes to the financial statements to bring them closer to the budget and to be more profitable."

Losses were turned into profits by inflating pre-production costs for shows such as Phantom of the Opera, Showboat and Ragtime; improperly transferring expenses between shows; moving expenses from one time period to another and inflating company assets.

Eckstein also went so far as to hire an outside computer consultant to alter the company's accounting software to allow company accountants to make changes to Livent's financial records without leaving an audit trail.

Drabinsky and Gottlieb have pled not guilty. Eckstein, on the other hand, pled guilty to one count of fraud last year and was given a conditional sentence of two years, less a day. He also pled guilty to fraud charges laid by the U.S. Securities and Exchange Commission in connection with the collapse of Livent in 1998. He has yet to be sentenced in that case.

And while Eckstein pled guilty for his part in the Livent fraud, he told the court of trying to rectify Livent's accounts — or at least pointing out how the alleged fraudulent accounting would not work. When Drabinsky allegedly told him to move advertising expenses into future years, Eckstein testified that he said the plan wouldn't work because the company's outside auditors — Deloitte and Touche — would call Livent's ad agency to ensure the accounts of the two companies matched. Drabinsky then allegedly instructed Robert Topol to ensure the agencies would confirm the fraudulent accounts to the auditors. The companies agreed.

Eckstein also told the court that prior to Livent's initial public offering in 1993 he uncovered more than $6 million in fraudulent transactions buried in the company's balance sheet. Much of those overstated assets related to money that had improperly flowed to Drabinsky and Gottlieb as part of a false-invoice scheme involving Peter Kofman. Eckstein testified that he told Gottlieb that those assets should be written off to ensure the company could enter the public realm with a clean balance sheet. And while Gottlieb allegedly agreed initially, he backed down when he realized that the large write-off would not make the company's books look good to potential investors.

During his testimony, Eckstein frequently looked over at Drabinsky and Gottlieb. At one point he looked out into the court's public gallery and saw another familiar face: Robert Topol. Charges against Topol were dropped last year after a judge determined that the excessive delays in the proceedings had denied him his right to a speedy trial. Topol didn't stay long. Once his presence was noted, he was told not to come back on the off chance either prosecutors or defence lawyers call him as a witness.

Eckstein's testimony is expected to continue through tomorrow. But who knows, given the number of defence objections, it could go longer than that. Let's hope Greenspan's assistant got his chair fixed.

But Kofman wasn't biting. He looked perplexed when Gottlieb's lawyer Brian Greenspan asked him if he was familiar with the phrase and was equally adamant when Drabinsky's lawyer Eddie Greenspan quizzed him on the same term. Eddie Greenspan seemed incredulous and pressed him on it since — after all — he had been intimately involved with Livent for years. But Kofman wouldn't budge. "It was not an expression I would have used or heard," he told the court. "I was not in the theatre business. I was in the construction business."

But Eddie Greenspan pressed on. Standing at the podium in the centre of the courtroom and clutching a copy of a book entitled "Creative Arts Marketing," he asked whether Kofman knew how to use a computer? If so, why hadn't he spent some time on the Internet looking up the term? Had he done so, within "two minutes" he would have found well-respected sources like Harvard University discussing how common and important the practice of giving away free tickets can be in the theatre business, Greenspan told the court.

The implication, of course, is that prosecutors got it all wrong when they allege that the free tickets given away to its Los Angeles production of Ragtime was a fraudulent means to prop up the profitability of the show. Had the crown spent some time on "the Google" they would have found that Livent was merely engaging in a time-honored tradition of giving away comp tickets to generate good word-of-mouth for the show. And he's got a point. After all, just about every company gives away some of its product for free or at a sizable discount in an effort to generate enough buzz to ultimately boost sales.

The problem comes with how the company accounts for that discounted and free product on its books and to its shareholders. I'm not sure Harvard University would approve of forcing suppliers to unwittingly buy thousands of theatre tickets and then demand they submit bogus invoices purporting to work on the company's capital projects in order to get paid.

Myron Gottlieb was not the architect of the frauds that ultimately destroyed Livent as prosecutors allege, but rather was instrumental in bringing a fraudulent ticket purchasing scheme to an end, a Toronto court heard today. Gottlieb was upset when Peter Kofman — an engineer who worked on Livent's theatre projects — complained to him that tens of thousands of dollars worth of theatre tickets had been charged to his personal credit card, Kofman testified under cross examination.

Both Drabinsky and Gottlieb have pled not guilty to fraud and forgery charges. Both men have maintained their innocence and have long maintained that any fraud at the theatre company was masterminded by other Livent executives.

Kofman testified earlier that in 1997 and 1998 hundreds of thousands of dollars worth of tickets to Livent's production of Ragtime in Los Angeles were charged to him and his company, Kofman Engineering Services Ltd. He did not approve of the initial purchases, but went along with the scheme because he felt it was the only way he would get paid for his legitimate Livent work, Kofman told the court.

Kofman complained to Gottlieb about the scheme in December 1997 when he learned his personal American Express credit card had been used for some of the purchases — and that the card was now over its limit. "He was not happy that had occurred," Kofman testified.

Gottlieb assured Kofman he would be reimbursed and ordered cheques to be issued. Those cheques showed the payments came from Livent’s Ragtime account and were described in on cheque stubs as "Amex card reimbursement — L.A."

That's different from other reimbursements allegedly arranged by Gordon Eckstein, Livent's former senior vice president of finance. Those repayments were issued through Livent Realty New York or Livent Realty Chicago — special subsidiary companies established to manage Livent's theatre projects in those cities. The invoices for those payments made no mention of ticket purchases, but purported to be payments for Kofman's work on the company's theatres. "I’d suggest that when Mr. Gottlieb orders reimbursement, the cheque and the stub tell the truth," Mr. Greenspan said. "He doesn't say draw up a phony invoice."

Neither Brian nor Eddie Greenspan, who is acting on behalf of Garth Drabinsky, spent much time asking Kofman about the millions of dollars in payments Kofman made to the duo as part of another bogus invoice scheme that occurred before Livent became a public company. In his earlier testimony, Kofman described dozens of fraudulent invoices Drabinsky and Gottlieb submitted to him for "introductions" and other business expenses. None of that work was ever done, but Livent always reimbursed those payments along with Kofman's legitimate engineering expenses.

Eddie Greenspan did needle Kofman about an apparent inconsistency between his testimony yesterday and statements he gave police nearly 10 years ago about the details of a conversation between the two men regarding the phony invoice scheme.

Prosecutors allege the payments were designed to get around bank covenants that limited the amount of the money the pair could take from Livent. Defense lawyers, on the other hand, hinted that the payments were merely a way to reduce the amount of tax the company paid.

However, both lawyers spent considerable amount of time grilling Kofman about his strained relationship with Gordon Eckstein. Eddie Greenspan read out in court Kofman's earlier statements to investigators which described Eckstein as "arrogant" and "dictatorial" who was verbally abusive to Kofman's staff and even used racial slurs.

And while Eckstein was known to be in charge of Livent's accounting, Kofman testified he didn't know whether Eckstein was "pushing his own weight" around or taking direction from others. Prosecutors allege that Eckstein was merely a conduit for the widespread accounting fraud that Drabinsky and Gottlieb oversaw. Defense lawyers are expected to lay the blame on Eckstein and other members of Livent's accounting staff.

Eckstein, who was originally charged alongside Drabinsky and Gottlieb pled guilty to fraud charges last year. He begins his testimony Wednesday.

Kofman eventually agreed to buy the tickets and even make numerous other purchases when Livent tangled "the little carrot" of reimbursement in front of him, he said. Kofman didn't pay much attention to the ticket purchases since he was working full time in New York and was under incredible pressure to ensure that the rehabilitation of Livent's theatres in that city remained on schedule.

He soon came to regret the decision when Livent refused to reimburse him for thousands of dollars resulting from the exchange difference between the Canadian and American currency. That refusal led to a heated exchange with Livent's former senior vice-president of finance, Gordon Eckstein, Kofman testified. "That was the straw that broke the camel's back. I exploded," he told the court. "Gordon [Eckstein] refused to reimburse me. He said my accountant was an idiot and actually accused me of trying to do something untoward!"

Within a year of the last ticket purchase, Drabinsky and Gottlieb sold a controlling stake in the company to Hollywood powerbroker Michael Ovitz who pushed the men out after uncovering the alleged fraud. Soon thereafter Kofman attended a meeting with the duo at Gottlieb's house where the pair tried to assure him he had done nothing wrong and that all the money that had been funneled through Kofman’s company had ultimately gone into Livent’s theatre projects.

But those so-called phony invoices did come back to haunt Kofman. Once Drabinsky and Gottlieb left the company Kofman was frozen out of any additional work on Livent's theatres. Soon after the company collapsed into bankruptcy and Kofman became just another one of the company’s unsecured creditors. And it would only get worse. As details of the alleged accounting fraud emerged, Kofman found himself being named as a participant in the alleged elaborate plot to defraud shareholders. Those allegations made it impossible for him and many of his senior staff to find work. It would take another three years for Kofman to extricate himself from the Livent quagmire, he testified. "I can't bear to think about how much all of this cost me."

Kofman will face cross examination from Drabinsky and Gottlieb's lawyers: Eddie Greenspan and his brother Brian on Tuesday.

In 1993, when Drabinsky and Gottlieb began contemplating taking Livent public, Kofman demanded that the phony billing scheme come to an end. But his fears that participation in the scheme was the only way he was going to get paid appeared to be well founded. After formally breaking ties with King Commodity Services, Livent ignored Kofman's legitimate bills for nearly eight months, he testified.

Kofman's financial situation became so dire that he confronted Drabinsky in a car ride the pair took to check out a prospective project in Brantford, Ontario. When Kofman complained about his difficulty getting paid, Drabinsky allegedly shot back that Kofman had already been paid millions of dollars. Kofman was taken aback and maintained that most of that money had actually been funneled back to Livent. The exchange prompted Kofman to write a memo to Drabinsky in March 1994 that included a chart showing that while Livent paid Kofman just over $8.3 million between 1991 and 1994, more than $5.8 million was ultimately re-directed back to Gottlieb and Drabinsky as part of the alleged phony invoice scheme.

While he could not recall how the idea originally came up, Kofman testified that Livent founders Myron Gottlieb and Garth Drabinsky told him he would have to pay the men personally for "business development" work that was never actually performed. Kofman, in turn would bill Live Entertainment Corporation of Canada — a predecessor to Livent — for that allegedly bogus work as well as any other legitimate engineering work Kofman performed. In his opening statement last week, chief Livent prosecutor Robert Hubbard alleged that the phony invoice scheme was an attempt to circumvent bank covenants that limited the amount of money Drabinsky and Gottlieb could take out of the company.

The scheme of charging Kofman for business development work was ironic since Drabinsky and Gottlieb often complained about any work Kofman did for his other clients, he said. "If there was a bone of contention it was that they (Drabinsky and Gottlieb) did not want us to do work for anyone else," Kofman testified.

The arrangement changed in 1990 when Gottlieb told Kofman that the payments would no longer go to Drabinsky and Gottlieb personally, but would be funneled through a company called King Commodity Service — a company in which Gottlieb was president. Kofman signed an agreement with Gottlieb agreeing to hire King as its fiscal agent for a fee of $2 million a year. Kofman continued to pay King's bills which, in turn, were always reimbursed by Livent. However, to this day Kofman told the court he has no idea what King Commodity Services did and maintains that the company never did any actual work for this company.