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Greenspan: CFO Framed Livent Founders

Over the course of his cross examination of Maria Messina, defence lawyer Edward Greenspan pointed out inconsistencies in the former Livent chief financial officers evidence that might convince the judge overseeing the case to discount her testimony. Today, on the sixth and final day of his cross examination, he attacked her for the fact that aspects of her story have not changed at all.
The testimony in question involves a series of conversations Messina says she had with Drabinsky in June 1998, in which the Livent founder instructed Messina to deliberately manipulate financial projections for the companys second quarter before handing those figures over to new managers brought in by former Hollywood super-agent Michael Ovitz. When Messina presented Drabinsky with the financials that anticipated a $13 million loss for the period, the theatre impresario exploded and allegedly said: These numbers are all fucked up. You don’t know what the fuck you are doing, Messina testified earlier. You can’t show these to anyone. The new guys don’t understand the business. I have to teach them.
Shortly after that conversation, Drabinsky allegedly insisted on removing millions of dollars in expenses from the projections and adding millions in additional and nonexistent revenue. By the time he was done remaking the document, the loss was magically transformed into a modest profit. Messina made the changes, but told the new Livent managers about the manipulations who then instructed her not to show Drabinsky any more financial documents before they saw them.
Messinas account of the encounter is almost exactly the same one she produced for Stikeman Elliot as part of her work to prepare for a lawsuit against Drabinsky Livent co-founder Myron Gottlieb, Greenspan pointed out. Your testimony on this count is scripted, rehearsed and performed, he said. [Its been] idealized and sanitized and you come here and present it like its your memory.
It is my memory, Messina shot back. I created the document. I know what happened.
Much of the rest of todays cross examination was spent going over the events in late April and early May of 1998 the period in which Messina finally stood up to Drabinsky and Gottlieb over the alleged fraudulent manipulations occurring at Livent and wrote the men a memo saying she would not support the accounting irregularities.
That memo was prompted by advice from her lawyer Les Wittlin after former Livent accountant Chris Craib told Messina on April 24th that he had attended a meeting with Drabinsky and Gordon Eckstein where financial manipulations were openly discussed. However, Greenspan pointed out that Messinas first meeting with Wittlin occurred on April 23rd the day before that alleged meeting and during Messinas two-hour meeting with the lawyer, she made no mention of fraud at Livent.
(Heres another item for the Livent trivia collectors. Messina did not pick Wittlin a senior corporate lawyer at the Toronto firm of Lang Michner at random. She met him at a Bar Mitzvah she attended while dating Aaron Glassman, a partner at Messinas old accounting firm Deloitte and Touche as well as one of the partners overseeing the Livent file.)
Messina says she first met with Wittlin because she suspected Livent managers were planning to continue to cook the books. She contacted the lawyer again after Craib told her about the meeting and thats when he told her to write the memo. Messina conceded she did not disclose the alleged fraud during her first meeting with Wittlan but lost her nerve after the lawyer suggested that: Maria Messina, professional chartered accountant and woman of honesty and integrity would not let that happen.
“It was like a knife through my heart and that’s when I ended the meeting,” Messina told the court. And while she did not disclose the full extent of the fraud to the lawyer, she did discuss her suspicions that company managers would engage in accounting entries that were not in accordance with Canadian GAAP [Generally Accepted Accounting Principles].
Wittlan testified at the preliminary hearing that he got the impression that in their discussions Messina was referring merely to aggressive accounting, not fraud. And anyone who read the memo Messina produced would not think she was accusing Drabinsky and Gottlieb of fraud, Greenspan insisted.
In the memo, Messina complained that she was concerned that Livents first quarter financials would not fairly represent the companys true financial results and that she could not support the judgments made by management in the preparation of the 1998 Q1 financial statements.
Why not use the word fraud [in the memo]? Greenspan asked.
At the time I was afraid to put those words down on paper, Messina replied. I was afraid to use those words.
If Mr. Drabinsky and Mr. Gottlieb did not know about the fraud, [this memo] would not alert them to it, Greenspan said. Im going to suggest to you that this memo was circulated so you could do nothing and later claim you were against the fraud.
I completely disagree with you because its not true, Messina said.
Whether the memo used the word fraud or not, it stopped the alleged fraud at least for a little while Messina told the court. The [illegal accounting] rolls stopped after the first quarter for the first time, she said. The memo accomplished what I wanted.
All this debate over accounting manipulations in the first quarter may be moot, since according to Greenspan the meeting where those manipulations were discussed never happened. Greenspan accused Messina of colluding with Chris Craib to fabricate their evidence regarding the meeting. Im going to suggest to you that you know that Chris Craib made up the April 24th Q1 story about these so-called manipulations, Greenspan said.
He did not, sir, replied Messina.
And the reason you know is because you made it up with him, Greenspan continued.
Thats ridiculous, Messina told the court.
Brian Greenspan, the defence lawyer representing Myron Gottlieb, begins his cross examination of Messina tomorrow.