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The evidence against Garth Drabinsky and Myron Gottlieb is “overwhelming” and the Livent Inc. co-founders should be convicted of fraud and forgery, Crown lawyers say in their closing submission in the long-running case.

The written submission, which has been filed in court, says “it is impossible to deny” that a fraud occurred at Livent, and argues the evidence clearly shows Mr. Drabinsky and Mr. Gottlieb personally directed the undertaking.

“The accused directed and participated in a large-scale accounting fraud that lasted over five years,” the Crown argues.

Defence lawyers have not yet responded to the Crown's case. They must file their closing submission by Dec. 8, and both sides will appear in court beginning Dec. 15 to make their closing arguments orally before Madam Justice Mary Lou Benotto.

Mr. Drabinsky and Mr. Gottlieb are charged with two counts of fraud and one count of forgery related to misstating the financial statements of Livent from 1993 to 1998. Both men have pleaded not guilty and denied the allegations, and have suggested the fraud was conducted by former senior vice-president of financial Gordon Eckstein without their knowledge.

In its closing submission, the Crown refutes that suggestion, arguing both men were the architects of the fraud and had the most to gain from Livent's accounting manipulations as the company's largest shareholders.

Other Livent employees, including Mr. Eckstein, “had little to gain” in carrying out a fraud, the Crown says.

“Only the accused had a sufficient financial motive to fraudulently maintain the overstated income and asset levels of Livent,” the submission states.

The Crown submission includes an undated 10-page letter written by Mr. Drabinsky to his then-girlfriend, detailing problems in their relationship and discussing his difficult decision to leave his marriage for her.

The Crown says the letter shows Mr. Drabinsky speaking of an “impossible level of personal debt” that has “strangled” him for five years and mentions “how complex it would be to eliminate it.”

The Crown also argues both men were extremely hands-on managers with a sophisticated knowledge of accounting and a detailed interest in all accounting matters at Livent. The submission notes the accused even questioned modest expenses for greeting cards and a new file cabinet.

“Given their positions at Livent, it is implausible that the accused were unaware of the financial state of the company,” the Crown argues.

The Crown submission also highlights numerous documents showing how accounting staff summarized fraudulent manipulations for various periods, and lists examples of comments written on those documents in the handwriting of both the accused.

In many cases, the Crown said amounts being improperly “rolled” to a future period were summarized and highlighted in a separate box on the first page of the financial statements.

“They are impossible to miss and would be obvious even to the most indolent CEO,” the Crown says. “It is inconceivable that these major reallocations could have escaped the attention of the senior executives.”

The Crown alleges the fraud began before Livent became a public company, starting when the accused set up a false invoice scheme to extract $8-million of extra payments for themselves from suppliers when Livent was still a private partnership run by the two men.

“The accused hid the kickback payments in various asset accounts of the partnership,” the Crown says. “Consequently, an effect of the kickback scheme was to falsify the balance sheet of the partnership.”

That meant Livent's financial statements were false when the company did its initial public offering in 1993, the Crown argues.

After Livent became a public company, the Crown submission says Livent continued to fraudulently misstate its financial statements by “deleting, improperly deferring and disguising expenses” to artificially enhance the company's profit on a quarterly basis.

Among the examples given in the submission, the Crown says Livent transformed a $41-million loss into a $13.4-million profit for the third quarter of 1997 through “a series of manipulations.”

“The common element that permeates this case is the mischaracterization of expenses,” the Crown alleges.

The Crown says Livent raised financing of more than $500-million as a result of the fraud.

The submission also addresses a meeting in April, 1998, which the defence highlighted at length during the trial.

Witnesses said Mr. Drabinsky attended the meeting where he personally dictated accounting manipulations for the first quarter of 1998, but his lawyers argued he could not have been at the meeting because he was in Washington that day.

In its submission, the Crown says Mr. Drabinsky returned to Toronto later that day, so the meeting could have occurred later than one witness had originally recalled. Moreover, the Crown says the case does not hinge on one meeting and it is “immaterial” whether Mr. Drabinsky attended or not because there is ample other evidence of his involvement.

“The Crown is relying on the entire process, not just a specific meeting, to establish the involvement of the accused in the fraudulent accounting at Livent,” the submission says.