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Livent CFO Thought Offices Were Bugged

Livents former chief financial officer feared that her offices were bugged, an Ontario court heard earlier today. Shortly after learning about the alleged widespread fraud at Livent, Maria Messina suspected listening devices had been placed in her office, she said. Those fears drove Messina to use telephones in unoccupied Livent offices or her home phone to carry on secret conversations with auditors at Deloitte & Touche to urge them to get tough with Livent and force the company to take a more conservative approach to its accounting.

Under questioning from Brian Greenspan, the defence lawyer representing Livent co-founder Myron Gottlieb, Messina conceded she did not tell anyone about the suspected bugging. Did you tell a therapist? he asked.

Excuse me? Messina replied.

Well, if you thought your office was bugged, isnt that a little paranoid?

No sir. There was a pervasive fraud going on and I was afraid of that, she replied.

While Messina was urging Deloitte & Touche to be more aggressive with Livent’s senior managers, she did not disclose the fact the companys books were allegedly filled with bogus and fraudulent entries, she said. I was trying to do what I could to mitigate the effects of the fraud, Messina said.

But those efforts were frustrated when Deloitte continued to allow Livents aggressive accounting. Id sayyou know what these guys are like. If you let them get away with something once they will do it every time, Messina told the RCMP in an interview shortly after she blew the whistle on the alleged fraud. I have no credibility, because every time I say that the auditors won’t allow it, you allow it. So they don’t listen to me. They just slough me off as Ms. conservative, or Ms. nuisance.

In one instance, Messina urged Deloitte auditor Claudio Russo to reject Livents aggressive accounting of a sponsorship deal with American Express. Messina expressed frustration when Russo said he would need a rationale to reject Livents proposed treatment of the deal. Since the decision was a pure judgment call, no rationale was needed, Messina told Russo. I’ve already laid down the foundation, so you can say no, she told the RCMP. They’re expecting you to say no.

Messina warned the auditors of another contentious Livent transaction in the fall of 1997. Messina testified that Deloitte auditor Peter Chant was surprised and shocked to learn that Livent planned to book revenue from selling the naming rights to the Pantages theatre in the third quarter of the year, even though the deal had not yet been concluded.

Livent and its auditors eventually came to blows over the deal, with both Livent and Deloitte & Touche seeking outside opinions about when the deal should be recognized on the companys books. Eventually Deloitte relented and agreed to book the revenue in the 1997 third quarter.

Messina had told the RCMP that Drabinsky and Gottlieb hate professionals and uses them only when necessary. However, the events surrounding the naming rights issue showed that Drabinsky and Gottlieb had no hesitation about using professionals when it came to the companys accounting, Greenspan suggested. Garth Drabinsky and Myron Gottlieb not only used professionals, they relied on them for advice, he said.

No sir, it shows that they dominated the process for accounting for transactions, Messina replied. They bullied Deloitte & Touche. They were relentless in getting what they wanted.

They were ruthless with Deloitte, Greenspan shot back in a reference to her earlier testimony of Myron Gottlieb as ruthless.

Greenspan also accused Messina of changing her testimony when it came to using the word manipulations. Messina used the word often in answering questions from prosecutors, but Greenspan suggested that she never used that word when dealing directly with Gottlieb or Drabinsky.

Greenspan read back her testimony regarding her discussions with Gottlieb on April 25, 1998 a day after she had been told by former Livent controller Chris Craib about a meeting he attended where manipulations of the companys first quarter financial results were openly discussed. However, in her testimony at the preliminary hearing, Messina used the word adjustments, Greenspan said.

Messina used the words manipulations to describe her meeting with Drabinsky and Gottlieb shortly after writing a memo in which she said she would not support the manipulated first quarter financials. In describing the same event at the preliminary hearing, again, Messina used the word adjustments instead of manipulations, Greenspan pointed out.

Greenspan suggested the change was no innocent slip of the tongue, but that Messina deliberately changed the word. Isnt it curious that virtually every time you use the word ‘adjustments’ at the preliminary inquiry, you use the word ‘manipulations’ here at the trial, Greenspan said.

Messina conceded she may not have used the word manipulations in speaking with Drabinsky or Gottlieb. However: I was speaking with Mr. Gottlieb specifically about the fraud and whether I used the word adjustment or manipulation, he knew exactly what I was talking about, Messina replied.

Messina is expected to wrap up her testimony tomorrow.