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The co-founders of Livent Inc. have relied on an implausibly complicated conspiracy theory to explain how an accounting fraud occurred at the company for eight years without their knowledge, prosecutors told a court Tuesday.

During the first day of closing arguments at the long-running trial of Garth Drabinsky and Myron Gottlieb, Crown attorneys working on the case challenged the defence position that the two accused are innocent and were elaborately framed for the fraud after it was detected.

“There's a much simpler – and in my submission, more logical – explanation, which is that the accused did it,” Crown attorney Amanda Rubaszek said.

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 have accused former senior vice-president of finance Gordon Eckstein of conducting the fraud without their knowledge.

Both the Crown and defence have previously filed written closing submissions in the case, but Tuesday appeared before Madam Justice Mary Lou Benotto of the Ontario Superior Court to begin presenting oral arguments.

The Crown completed its arguments Tuesday, and lawyers for Mr. Gottlieb and Mr. Drabinsky are expected to speak Wednesday and Thursday.

Ms. Rubaszek said the simplest explanation for the evidence in the case is that the accused knew about and were directing the fraud.

For example, she said it is more logical that Mr. Drabinsky and Mr. Gottlieb attended meetings where fraud was discussed than it is that former accounting employees worked together to concoct stories about meetings that never occurred.

Similarly, she suggested handwriting found on incriminating accounting documents in Mr. Drabinsky's office was simply his handwriting, rejecting defence suggestions it may have been someone else's writing or may have been forged.

Ms. Rubaszek also said it is illogical for the defence to suggest that members of a new ownership group, which bought a controlling stake in Livent in 1998, decided to frame the two co-founders for the fraud once it was detected.

Lawyer Edward Greenspan, who is representing Mr. Drabinsky, suggested in his written submissions that New York businessman Robert Webster, who joined Livent after new owners took control in 1998, may have even planted forged documents in Mr. Drabinsky's office before they were seized by investigators.

Ms. Rubaszek said there is no evidence to support allegations of obstruction of justice and perjury.

“The Crown submission is that this is preposterous, and there's no evidentiary basis for this position,” she said.

Moreover, she said, if Mr. Webster were planting fake documents in Mr. Drabinsky's office, she questioned why he wouldn't have planted more clearing incriminating and explicit documents.

“It doesn't make sense – none of it does,” she said. “It's speculation on the part of the defence who are trying quite desperately to distance themselves from some very damaging documents.”

She said the evidence at the trial showed Mr. Webster became suspicious about irregular accounting matters about five weeks after joining Livent, and began asking questions.

She said it is incredible, therefore, that the company's two co-founders could have run Livent for eight years before Mr. Webster's arrival and never notice any irregularities.

Mr. Gottlieb, in particular, signed almost all of the company's cheques, she 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.

She also rejected the defence contention that the fact the two men never cashed out and sold their Livent shares proves they knew nothing about the fraud. They were still holding the shares when the fraud was detected and the company went out of business.

Ms. Rubaszek said Mr. Drabinsky and Mr. Gottlieb were prohibited by the new investing group from selling shares for one year after the deal was completed. And she suggested they may have been confident the fraud would never be detected.

“Let's not forget, this fraud worked for a long time, nearly eight years,” she said. “Just because they didn't sell their shares and walk away doesn't mean they had no motive.”

The accounting staff had even less motive for concocting the fraud, she added, suggesting there was little benefit for Mr. Eckstein to create and hide a fraud, and indeed it would have been stressful and complicated to have done so.

“It's ridiculous to suggest he did this all on his own,” she said.

The defence has also argued that Mr. Eckstein was an incompetent accountant and a highly abusive manager. Ms. Rubaszek said it invites the question why he was not fired until after new managers took control of the company.

“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.”