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Livent Fraud Documents Found in Drabinsky's Office

Over the past five months of the criminal fraud trial of Garth Drabinsky and Myron Gottlieb, prosecutors have spent much time introducing the reams of internal Livent documents that they insist prove that the Livent founders were fully aware of the massive fraud at the theatre company.

Defence lawyers, on the other hand, have spent most of their time raising questions about the credibility of the witnesses who testified about those documents. Today, as the trial enters its final phase, defence lawyers tried to raise questions about the investigators who found those documents.

John Beer, a former RCMP officer who now works as a forensic investigator for KPMG LLP, is the penultimate witness scheduled to appear at the trial. Beer testified that on Aug. 11, 1998 he went to Livents Yorkville offices to secure and inventory documents from Drabinsky and Gottliebs offices. Beer and his colleague Gary Gill (who will testify tomorrow) systematically labeled every section of Drabinsky and Gottliebs office with post-it notes to identify where the documents were found. They even videotaped the rooms.

In the short video played for the court, Beer points out the locations of documents in the offices of the Livent founders. Drabinskys large office is tastefully decorated with abstract art on the walls, hardwood floors covered with colourful area rugs and solid hardwood furniture. Drabinskys office contained a small library with walls lined with hundreds of books. In the video, Beer points to a bar area in Drabinskys office complete with glasses in a cupboard, before moving to the bathroom complete with shower.

Gottliebs office is smaller with more modern furniture. Its cluttered with documents. with files resting on the floor and on a window ledge overlooking Avenue Road, as well as on a suede chair in the office. Drabinsky and Gottlieb had been suspended from the company the day before the videotape was made. An indication of the haste in which the men exited the company: Gottliebs reading glasses are resting on a pile of papers in the middle of his desk.

The actual cataloguing of the documents was not videotaped. But Beer testified that he, or his colleague, Gary Gill, wrote where they were found on the back of the documents, along with the date and their initials. For instance, one major document a summary of financial manipulations in 1997 – was located in section B-2 of Drabinskys office. Beer is seen on the videotape indicating that B-2 relates to the second of two brown leather briefcases found behind Drabinskys desk.

Lead prosecutor Robert Hubbard took Beer through dozens of documents seized from the office. In most cases, Beers initials and the location where the documents were found are on the back of the document, but in several cases, there are no initials. Beer testified that sometimes, he only put the initials on the file folders where the document was found or the boxes where the file was stored.

At one point Hubbard offered to enter the entire beat-up banker box as an exhibit, prompting Edward Greenspan, the defence lawyer representing Drabinsky to comment: If my friend wants to put in boxes [as evidence], or if he wants to put in The Toronto Sun, that’s all fine with me, Greenspan said. I don’t accept any of what’s being led. After some discussion, Madam Justice Mary Lou Benotto suggested that entering a digital photo of the box in question would be sufficient.

The documents were turned over to the RCMP in Dec. 1998, shortly after the police launched their own investigation into the alleged accounting fraud at the theatre company. They have remained in police custody ever since.

Over th e course of the trial, defence lawyers have questioned the provenance of the many of the documents prosecutors have submitted, arguing there is no evidence that either Drabinsky or Gottlieb had the documents in their possession or even saw them.

But thats not the case for all the documents. That document seized from Drabinskys briefcase, for instance, contains Beers initials as well as a notation of where it was seized. The document has been the subject of previous testimony from Chris Craib. The former Livent controller testified that he helped Gordon Eckstein Livents former senior vice president of finance and administration to prepare the document that listed more than $21 million in accounting problems from 1997 that had been pushed into 1998.

One document Mr. Beer identified contained the investigator’s initials and also had a location code for Mr. Drabinsky’s briefcase beside his desk. It was a report detailing $21-million of problems that were omitted from the financial statements in 1997 and were instead rolled to 1998. Craib also testified that during an argument between Drabinsky and Eckstein, he witnessed Drabinsky pull the document from the briefcase.

Just who found that document quickly became a hot topic as Greenspan began his cross examination of Beer. In his testimony Beer made a point of stating that Patrick OKelly, a lawyer from the Toronto law firm of Stikeman Elliott LLP, who helped catalogue documents in Drabinskys office, had nothing to do with finding the briefcase document.

But those assurances were not good enough for Greenspan who suggested that OKelly must have been the one to find the document. After all, according to Beer, OKelly was sitting behind Drabinskys desk right next to the briefcases while Beer and Gill sat in front of the desk, Greenspan suggested. Greenspan even replayed the video to emphasis that he was sitting right next to the briefcases.

But Beer disagreed. It was certainly not Mr. OKelly who found [the document], Beer said. I looked in one of the briefcases and Mr. Gill looked in the other. I dont recall Mr. OKelly looking into the briefcases.

Stikemen Elliott lawyers have been at the centre of the investigation into alleged accounting fraud at Livent and defence lawyers have alleged that the law firm is part of a massive conspiracy with other Livent accounting staff to frame Drabinsky and Gottlieb.

Greenspan suggested that KPMG may have had motive to work against Drabinsky as well. After all, it was KPMG who had done the initial due diligence on Livent for Michael Ovitz and failed to detect the alleged accounting fraud at the company, Greenspan said. KPMG was involved in an effort to protect its reputation as well as its pocketbook, Greenspan suggested. Wouldnt they have an interest in suggesting that they were misled by the fraudulent misrepresentation of others?

I cant agree with your speculation Mr. Greenspan, Beer replied.

Its not speculation, its common sense, Greenspan replied. KPMG certainly had a strained relationship with Drabinsky. At the time of the Livent investigation Drabinsky was actually a KPMG client, employing one of their accountants for his personal finances. That relationship should have prohibited the accounting firm from investigating Drabinsky. Even after becoming aware of the conflict, KPMG continued to work on the Livent investigation. Drabinsky eventually won a court injunction that permanently banned KPMG from acting against Drabinsky.

The trial continues tomorrow.