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Livent fraud blame game begins

Myron Gottlieb was not the architect of the frauds that ultimately destroyed Livent as prosecutors allege, but rather was instrumental in bringing a fraudulent ticket purchasing scheme to an end, a Toronto court heard today. Gottlieb was upset when Peter Kofman — an engineer who worked on Livent’s theatre projects — complained to him that tens of thousands of dollars worth of theatre tickets had been charged to his personal credit card, Kofman testified under cross examination.Both Drabinsky and Gottlieb have pled not guilty to fraud and forgery charges. Both men have maintained their innocence and have long maintained that any fraud at the theatre company was masterminded by other Livent executives.Kofman testified earlier that in 1997 and 1998 hundreds of thousands of dollars worth of tickets to Livent’s production of Ragtimein Los Angeles were charged to him and his company, Kofman Engineering Services Ltd. He did not approve of the initial purchases, but went along with the scheme because he felt it was the only way he would get paid for his legitimate Livent work, Kofman told the court.Kofman complained to Gottlieb about the scheme in December 1997 when he learned his personal American Express credit card had been used for some of the purchases — and that the card was now over its limit. “He was not happy that had occurred,” Kofman testified.Gottlieb assured Kofman he would be reimbursed and ordered cheques to be issued. Those cheques showed the payments came from Livents Ragtimeaccount and were described in on cheque stubs as “Amex card reimbursement — L.A.”That’s different from other reimbursements allegedly arranged by Gordon Eckstein, Livent’s former senior vice president of finance. Those repayments were issued through Livent Realty New York or Livent Realty Chicago — special subsidiary companies established to manage Livent’s theatre projects in those cities. The invoices for those payments made no mention of ticket purchases, but purported to be payments for Kofman’s work on the company’s theatres. “I’d suggest that when Mr. Gottlieb orders reimbursement, the cheque and the stub tell the truth,” Mr. Greenspan said. “He doesn’t say draw up a phony invoice.”Neither Brian nor Eddie Greenspan, who is acting on behalf of Garth Drabinsky, spent much time asking Kofman about the millions of dollars in payments Kofman made to the duo as part of another bogus invoice scheme that occurred before Livent became a public company. In his earlier testimony, Kofman described dozens of fraudulent invoices Drabinsky and Gottlieb submitted to him for “introductions” and other business expenses. None of that work was ever done, but Livent always reimbursed those payments along with Kofman’s legitimate engineering expenses.Eddie Greenspan did needle Kofman about an apparent inconsistency between his testimony yesterday and statements he gave police nearly 10 years ago about the details of a conversation between the two men regarding the phony invoice scheme.Prosecutors allege the payments were designed to get around bank covenants that limited the amount of the money the pair could take from Livent. Defense lawyers, on the other hand, hinted that the payments were merely a way to reduce the amount of tax the company paid.However, both lawyers spent considerable amount of time grilling Kofman about his strained relationship with Gordon Eckstein. Eddie Greenspan read out in court Kofman’s earlier statements to investigators which described Eckstein as “arrogant” and “dictatorial” who was verbally abusive to Kofman’s staff and even used racial slurs.And while Eckstein was known to be in charge of Livent’s accounting, Kofman testified he didn’t know whether Eckstein was “pushing his own weight” around or taking direction from others. Prosecutors allege that Eckstein was merely a conduit for the widespread accounting fraud that Drabinsky and Gottlieb oversaw. Defense lawyers are expected to lay the blame on Eckstein and other members of Livent’s accounting staff.Eckstein, who was originally charged alongside Drabinsky and Gottlieb pled guilty to fraud charges last year. He begins his testimony Wednesday.