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Maria Messina turned down four job offers at Livent Inc. before finally agreeing to join the company's accounting group in 1996 to bolster her career.

The former audit partner at Deloitte & Touche told a Toronto court yesterday she decided she lacked hands-on experience working at a corporation. Besides, she added, Livent was an exciting live theatre company that was growing rapidly.

"I couldn't think of a better place to go than Livent to gain some experience," she said.

Instead of gaining career-building experience, however, the company's former chief financial officer said Livent became "a nightmare," leaving her "immobilized by fear" when she learned about a long-running accounting fraud about a year after joining the company.

Ms. Messina is testifying at the trial of Livent co-founders Garth Drabinsky and Myron Gottlieb, who are charged with fraud and forgery in connection with alleged manipulations of Livent's financial statements from 1993 to 1998.

They have both pleaded not guilty and have suggested the real mastermind of the fraud was Livent's former senior vice-president of finance, Gordon Eckstein.

In her first day of testimony at the trial, Ms. Messina said she first learned of the fraud in July, 1997, when she saw a set of internal financial statements showing a loss of about $20-million for the first six months of 1997, then later saw a subsequent set showing an $8-million profit.

She said Mr. Eckstein, who was her manager, simply explained such accounting manipulation was common at public companies.

"He said, 'Maria, it's just income smoothing. Everybody does it,'" she testified.

Ms. Messina said she asked him whether Mr. Drabinsky and Mr. Gottlieb knew what was happening. "He said, 'Where do you think this comes from?'" she said.

She testified she was shocked to learn of the extent of the manipulation.

"I was completely numb. It was complete shock and disbelief," she said. "I didn't want to believe it was happening. … I panicked, and I was completely immobilized by fear."

By the third quarter of that year, however, she said she was assisting in preparing financial statements that contained manipulations.

In that period, she said Mr. Eckstein asked her to prepare the financial statements for a meeting with the senior executives listing both the actual numbers and the manipulated numbers.

The statements included detailed schedules listing manipulations and totalling the sums being improperly omitted from the books to boost profits, Ms. Messina said.

At the meeting, she testified, Robert Topol, then the chief operating officer, told Mr. Drabinsky he felt the fraud was out of control and suggested the company consider taking a large writedown to put everything back on the books and end the manipulation.

She said Mr. Drabinsky replied that Livent had just completed a $125-million (U.S.) bond offering, and couldn't report a huge loss so soon afterward.

Although she was shocked by what was happening at the company, Ms. Messina said she didn't know how to get out of the situation and didn't have the courage to expose the fraud and "take on" Mr. Drabinsky and Mr. Gottlieb.

"They were men of money, power and influence, and I was a nobody," she said.

Instead, she said she settled on a campaign of "baby steps," and tried to persuade Mr. Eckstein to stop the fraud. She said he developed a proposal to square the books with a huge writedown in the fourth quarter of 1997, and that she pinned all her hopes on that plan.

It did not work. The company later reported a $27.5-million (Canadian) writedown in the fourth quarter of 1997, but she said very little of the adjustment related to the fraud.

At an executive meeting on Feb. 1, 1998, to discuss manipulations to the year-end financial statements, she said she realized the fraud was even escalating.

She said she learned expenses were also being improperly recorded as fixed assets - a manipulation she had not been aware of previously.

"To me it was really demotivating and demoralizing," she said.

Asked by Crown attorney Alex Hrybinsky how she felt about learning of further fraud, she replied it didn't really matter.

"The whole thing was a nightmare," she said.

Ms. Messina will continue her testimony today.

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