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Livent Controller's "Lousy Memory" Fingers Drabinsky

Of all the witnesses who are scheduled to testify in the criminal fraud trial of Livent founders Garth Drabinsky and Myron Gottlieb, you would think that that the testimony of Diane Winkfein, a junior accountant at Livent, would inflict the least amount of damage. After all, despite having a 23-year-long positive working relationship with Drabinsky, Winkfein had almost no professional contact with him while at Livent and only spoke a handful of times with Gottlieb. And while she was one of the longest serving members of Livents finance department, Winkfein has no official accounting credentials and told Livent investigators that she didnt think there was anything illegal about the widespread alleged accounting manipulations that occurred at the company. On top of that, Winkfein testified that she has a lousy memory.
Moments after Winkfein started to testify, Greenspan objected to her statements and suggested that Winkfein had little to offer when it came to talking about roles Drabinsky and Gottlieb played in the alleged fraud. “By [Winkfein’s] own admission, she knows nothing about accounting,” Greenspan said during her questioning by prosecutors, and is “not in a position to speculate” on how Drabinsky or Gottlieb’s role in the alleged fraud.
In spite of that, Winkfeins testimony and her performance under cross examination have scored points for the prosecution. Winkfein only testified for a few hours for the prosecution, but has been cross examined for two days so far by Edward Greenspan the lawyer representing Garth Drabinsky. Livent lawyers have been on a break for the past 10 days, but before that break Greenspan spent a considerable amount of time grilling Winkfein about a brief conversation she testified about having with Drabinsky in 1995 concerning the hiring of a new controller.
In an unusual move, Drabinsky insisted on conducting the interview personally. The prospective new hire was Paula Adler, a chartered accountant. Before bringing Adler in to meet Drabinsky, Winkfein testified that she asked Drabinsky about whether he was concerned about Adler. I asked him if she would have a problem with what we were doing with the numbers because we were shifting the numbers around, Winkfein testified earlier. Winkfein testified that Drabinsky told her: Oh, dont worry about that. She wont be involved with that.
On the face of it, the conversation seems kind of innocuous. So innocuous that Winkfein testified that she forgot about it entirely until 2005 when she was called to testify at the Livent preliminary hearing. It was a revelation that was met with incredulity by Greenspan. Ten years later, after giving thousands of pages of interviews, talking to the SEC, talking to the FBI, people who wanted Garth Drabinsky, the first time you mention this it is 2005 because you have such a fantastic memory, Greenspan said sarcastically.
Greenspan spent more than an hour listing 14 different occasions where Winkfein had an opportunity to relay this story a story that would fix Drabinsky not only with knowledge of the alleged fraud in 1995, but portrays him taking active steps to ensure that Livents alleged accounting manipulations were not discovered by some nosy chartered accountant. Greenspan painstakingly read excerpts from every one of those 14 interviews, depositions and sworn testimony, citing examples where Winkfein could have told your Paula Adler story.
But Winkfein would not budge. She acknowledged that she could have told the story in 1998 in interviews with Livents new managers, in 1999 in interviews with the RCMP or in 2000 during depositions with lawyers looking to sue Drabinsky and Gottlieb. But she just didnt remember at the time. Maybe your memory, 10 years later, is faulty,” Greenspan asked.
“Anything is possible, but I do recall the incident as I’ve recounted it to you,” Winkfein replied.
The more Greenspan grilled her about the story, the more believable it seemed to become. And things only got worse when Greenspan tried to probe the circumstances surrounding how she remembered the incident. Winkfein didnt remember the conversation, because she hadnt thought about Paula Adler in years. The chartered accountant was eventually hired by Drabinsky, but she only stayed with the company for two months, Winkfein told the court. When you had this epiphany did you pick up the phone and call a lawyer? Greenspan asked. Did you call your best friend, did you call the police?
I didnt think it was significant enough to call anyone, Winkfein replied.
If you didnt think it was a big deal, why say it, Greenspan asked.
It was a conversation I had with Mr. Drabinsky.
Greenspan continued to grill Winkfein about the Paula Adler story today and Winkfein continued to remain adamant about the conversation. But he did manage to move her slightly. At the preliminary hearing Winkfein testified that she asked Drabinsky if he thought Adler would be concerned about how we handle our accounting, not shifting around the numbers, as she testified at the trial. That slight change in wording means that Drabinsky could have thought Winkfein was referring to Livents penchant for aggressive accounting, rather than outright fraud, Greenspan suggested. These are different stories, Greenspan said. [How we handle our accounting] clearly embraces aggressive accounting.
That portion of my statement [concerning shifting numbers] was not what I said to Mr. Drabinsky, Winkfein said.
But has the damage been done? After all, Winkfein was an employee that Drabinsky trusted. He hired her as a bookkeeper at his law firm and she worked with him on many of his private ventures into filmmaking and attempts to open a film studio. She moved with him to Cineplex Odeon and finally was hired at Livent. Will that history make her revelations more credible to Madam Justice Mary Lou Benotto? Will Benotto ultimately believe Greenspans contention that Winkfeins faulty memory cannot be relied upon? Or will she side with prosecutors and rule that the now-infamous Paula Adler story is not only plausible but believable and affixes Drabinsky with damaging knowledge?
But Greenspan has landed more than a few punches of his own. On the first day of Winkfeins cross examination he landed a major blow when it came to the issue of Drabinskys alleged handwriting on Livents internal documents. Prosecutors are relying on that handwriting to prove the Livent founder was not only aware of the alleged fraud at the company, but was instrumental in directing those financial manipulations.
While showing Winkfein dozens of documents that illustrated the alleged financial fraud, Crown prosecutor Robert Hubbard asked Winkfein about a brief two-word notation stating ask Diane written on an internal Livent financial document from 1995. Winkfein stated that the handwriting looked like that of Garth Drabinsky.
But Greenspan showed Winkfein two versions of the document one in hard copy format that is included in the mass of binders containing the internal Livent financial statements, memos and other documents that are the lifeblood of the case, and another electronic version. While the hard copy contained the ask Diane notation, the electronic copy did not. “I’m going to suggest to you that it is absolutely, utterly impossible for Garth Drabinsky to have written that on that page because when it left Livent, it had no writing on it,” Greenspan said.
Winkfein agreed.
That revelation prompted the prosecutors to call for a short recess while they huddled over the document to try and figure out just whose handwriting that was. Hubbard even asked Greenspan if he wanted a sample of his handwriting and then casually handed Greenspan a note presumably with the words ask Diane in his handwriting.
The matter was quickly cleared up with a phone call to Sgt. Ann Koenig the longest serving member of the Livent team, who has worked on the case for the past eight years. Koenig was not in court that day since she was recovering from a recent back injury. It turns out the notation was hers. It was my fault,” Hubbard told the court. “If Sgt. Koenig had been here yesterday, she would have corrected me.
Besides the handwriting, Greenspan has gotten other concessions from Winkfein. Despite her controversial conversation with Drabinsky, Winkfein agreed that she never received any direct orders from either Drabinsky or Gottlieb to manipulate Livents financials. All of her instructions regarding Livents accounting came from Gordon Eckstein, Livents former senior vice president of finance and administration, Winkfein told the court. The instructions came from Eckstein? You never received those instructions from Garth or Myron, Greenspan suggested.
Correct, Winkfein replied.
The trial is sitting for three days this week before taking another two-week break until early September. Greenspan is expected to wrap up his cross examination of Winkfein on Wednesday followed by questions from Brian Greenspan, the lawyer representing Myron Gottlieb.