Skip to main content

The evidence against Garth Drabinsky and Myron Gottlieb is "overwhelming" and the Livent Inc. co-founders should be convicted of fraud, 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.

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

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

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

The Crown submission includes an undated 10-page letter written by Mr. Drabinsky to his then-girlfriend, detailing problems in their relationship. The Crown says the letter shows Mr. Drabinsky speaking of an "impossible level of personal debt" that has "strangled" him for five years.

The Crown also argues that both men were extremely hands-on managers with a sophisticated knowledge of accounting.

The Crown says numerous internal documents prepared for the executives summarized manipulations. In many cases, the Crown said amounts being improperly "rolled" to a future period were flagged in a separate box on the documents.

"They are impossible to miss and would be obvious even to the most indolent CEO. "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 two men set up a false invoice scheme to extract $8-million of extra payments for themselves from suppliers.

"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 went public in 1993, the Crown argues.

After Livent went public, it continued to fraudulently misstate its financial statements each quarter, the Crown says.

Among the examples given, 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."