The last major prosecution witness of the criminal fraud trial of Garth Drabinsky and Myron Gottlieb brought us back to where we started five months ago.
Peter Kofman, the president of Kofman Engineering, testified way back in May about a bogus invoicing scheme that saw the Livent founders charge Kofman and Execway Group Inc. another Livent supplier millions of dollars for work that was never performed. Kofman and Execway then billed Livent for the exact same amounts to recoup the payments. The scheme, prosecutors allege, was a means to circumvent restrictions imposed by their bankers on the amount of money the partners could take out of the start-up business. Today, Roy Wayment, the retired founder of Execway described his participation in the scheme, adding some more interesting details.
Wayment described a phone call he received in 1992 from Gottlieb in which he told him that he felt Drabinsky and Gottlieb deserved a finders fee as payment for the volume of work he was assigning to Execway. Wayment, who had built theatres for Cineplex Odeon when the pair were at the movie theatre company, told the court that Livents predecessor company Live Entertainment of Canada Corp. (LECC) accounted for about 40 per cent of his companys work at the time.
Myron felt that because of the amount of work that he and Garth had endorsed for Execway, to do that they were entitled to a finder’s fee, Wayment said. That’s basically how the conversation started.
Wayment said he was surprised by the conversation and told Gottlieb that he felt that he was entitled to his own cash bonus based on the amount of work Execway was doing above and beyond construction.
In the end, Wayment and Gottlieb agreed to pay each other bonuses for the exact same amount, Wayment said. Over a three-month period Wayment said he wrote three cheques to King Commodities a private company controlled by Gottlieb and Drabinsky. The first two cheques amounted to $53,500 and the third was for $74,900, totalling $181,900$170,000 plus GST. Wayment then received matching cheques from LECC, he told the court.
The procedure for the payments was Myron’s chauffeur would take a cheque to my office and my office would give the chauffeur a cheque of equal amount made out to King Commodities, Wayment told the court.
Prior to the arrangement with King Commodities, Execway also paid Drabinsky and Gottlieb $147,125 in 1991, prosecutors alleged. However, Wayment could not remember the details of that alleged transaction, he told the court. Wayments memory of the nearly 20-year-old transaction was not refreshed when crown prosecutor Alex Hrybinsky presented Wayment with cheques and invoices from the Livent founders demanding payment for solicitations that have assisted you with business development, and a corresponding invoice from Execway for the exact same amount. The Execway invoice purported to be for work on the Pantages Theatre and North York Centre for the Performing Arts.
Kofman described similar payments during the same period and testified that Drabinsky and Gottlieb never solicited any business on his behalf. Earlier witnesses have testified that Drabinsky and Gottlieb collected $8.1 million through the bogus invoice scheme. At least $6.8 million in LECC payments to Kofman and Execway were then booked to the companys balance sheet, making the company appear more valuable than it actually was when the company went public in 1993, prosecutors allege.
Wayment also testified about his participation in a ticket-purchasing scheme in 1997 to boost the sagging box office of Livents performance of Ragtimein Los Angeles. After visiting another Livent Executive, Wayment said Gordon Eckstein, Livents former senior vice president of finance and administration, called him into his office and asked him to buy tickets to the L.A. show.
It was an accommodation, Wayment said. I didn’t think there was anything wrong with what he was asking for.
There was nothing unusual about the request, Wayment told the court. During his time doing work at Cineplex, he noted that many free tickets were given away even when the theatres were full. Hrybinsky asked Wayment if he had ever been asked to purchase Livent tickets before.
No, I had been given lots of comp tickets before, but I hadnt purchased tickets on behalf of Livent before, Wayment replied.
Kofman also testified to participating in the ticketing scheme where prosecutors allege the suppliers eventually bought US$1.2 million in tickets to Ragtime, Los Angeles. Just as in the earlier transactions with King Commodities, many of the purchases by Kofman were reimbursed using false invoices that purported to be for work on the companys theatre projects in New York and Los Angeles. Prosecutors allege that as much as $432,000 in those false invoices were buried in Livents fixed assets, once again inflating the value of the company.
Defence lawyers had very few questions for Wayment. Brian Greenspan, the lawyer representing Gottlieb, did not ask any questions about either the King Commodity or the ticket purchasing scheme. The only questions he asked were about statements he gave to the Ontario Securities Commission and the RCMP in 1998 and 1999. In both interviews, Wayment told regulators and investigators that he had told Gottlieb he was going to be interviewed regarding the alleged schemes. Gottlieb allegedly told Wayment: Just tell the truth.
There was bad news for Chris Craib, the former Livent controller who came close to breaking down on the witness stand as a result of nearly two-weeks of gruelling interrogation at the hands of the Eddie and Brian Greenspan. Defence lawyers had requested that Craib remain under subpoena until today pending a possible defence motion. Today, they filed that motion and Craib will be required to remain under subpoena for the next month.
In the motion, defence lawyers requested access to the original copy of notes Craib says he made during the now infamous April 24, 1998 management meeting where Drabinsky allegedly openly discussed manipulating the companys first quarter financial results. The three-page document will be handed over to noted forensic document examiner Brian Lindblom who has permission to conduct non-destructive tests on the notes.
The trial now adjourns until Tuesday Oct. 21 when it will hear from the final prosecution witnesses. Both witnesses are investigators from the accounting firm of KPMG who were involved in the original seizure of documents from Livents offices in 1998. Their testimony is expected to take no more than four days in total.