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Livent's "Tormented" Whistleblower

One of the recurring themes at the heart of the criminal fraud trial of Livent founders Garth Drabinsky and Myron Gottlieb is looking beyond the surface to get at the truth. Prosecutors allege that while Livent managers painted a public picture of profitability to investors, behind the surface, a massive accounting fraud hid the companys mounting losses. The defence, on the other hand, is trying to convince Madam Justice Mary Lou Benotto to look beyond the surface accusations of witnesses who testify that Drabinsky and Gottlieb were the architects of that alleged fraud and find reasons not to believe their testimony.
To that end, Edward Greenspan the defence lawyer representing Drabinsky began his third day of cross-examining Maria Messina by highlighting the differences between her testimony, previous statements of the former Livent chief financial officer and other witnesses. However, some of Greenspans accusations may have been blunted by some of the very documents he was hoping would prove his point.
For instance, Greenspan tried to dispel the notion that Messina was the hero of the twisted Livent saga. To be fair, when it comes to whistleblowers, Messina isnt exactly Frank Serpico the undercover New York City cop who risked his life to testify against corrupt police officers in the 70s. Messina testified she learned of the alleged Livent fraud back in July 1997 but kept quiet for more than a year. She tried unsuccessfully to stop the fraud from the inside, but it wasnt until former Hollywood mogul Michael Ovitz bought a controlling stake in the company and installed new management that she finally disclosed the fraud. And even then, those managers had been at Livent for more than a month before she finally came forward.
But Messina only confessed after it was clear those managers were going to uncover the fraud on their own, Greenspan alleged. Robert Webster, Livents new executive vice president, had already started to unravel the fraud after discovering unusual budget overages at Livents Chicago theatre, Greenspan said. Messina did not disclose the fraud until the evening of August 6, 1998 after Webster asked her to go over the Chicago theatre accounts to try to make sense of the unusual charges. Isnt it the case that when Mr. Webster brought you in, it was up? It was over. He found you out and was asking questions and you had no place to go, Greenspan charged. Do you confess right away? No, you go away. Do you tell him right then?
No, I told him that evening, Messina replied.
The fact that Webster was onto the budget overages proves that it was only a matter of time before the alleged fraud was uncovered with or without Messina, Greenspan said. The jig was over, Greenspan said and pointed to an affidavit from Webster displayed on a large flat panel monitor in the courtroom where he testified about finding unusual accounting entries. But Greenspans charges that Webster was already onto the fraud were blunted somewhat by the same affidavit displayed on the monitor where Webster explained: I did not expect a cost accounting fraud of the type we discovered.
Greenspan didnt read that section to the court.
But Webster had no idea about the fraud when he called her into her office, she testified. He was asking her to look at budget overruns, not allegedly improper accounting treatments, said Messina. Without her disclosure, the fraud could have continued for some time, she said [Webster] had no idea, she told the court. We could have lied to him as had been done in the past.
But even with the disclosure, Messina is still a liar, Greenspan suggested. After all, she had lied to new managers for months before disclosing the fraud, he said. To prove his point, again Greenspan flashed a transcript of evidence given by Robert Webster in a Livent civil action. When asked if Messinas revelation shook his confidence in her integrity he replied: I was stunned [Messina] had lied to us during the due diligence. I was shaken.
Thats pretty tough stuff. But in the next paragraph Webster backs up Messinas statement that without her disclosure the alleged fraud could have kept going on. I think it was apparent to me they could have continued the fraud, Webster testified.
Greenspan didnt read that line to the court either.
Still, there are legitimate questions about Messinas actions after she learned of Livents allegedly improper accounting. Why didnt the chartered accountant blow the whistle sooner? Why didnt she just quit? Why didnt she, as Livents former auditor, quietly tell her old colleagues at Deloitte and Touche Livents accounting firm what was going on?
Greenspan peppered Messina with those questions over and over. Messina has already testified she was panicked, numb, and immobilized by fear. She also told the court previously she was afraid of what would happen to her if she accused Drabinsky and Gottlieb men of money, influence and power of fraud. You could have resigned and not said anything, Greenspan said.
I was tormented, Messina replied. I was tormented about staying and I was tormented about leaving and not disclosing (the fraud).
Drabinsky and Gottlieb have pleaded not guilty to charges of fraud and uttering forged documents in the trial that has been going on since the beginning of May. The Livent founders have maintained that they are innocent and defence lawyers have accused Gordon Eckstein, Livents former senior accountant and previous prosecution witness, of master-minding the fraud without their knowledge or consent.
Greenspan expanded that allegation to now include Messina. You took this preposterous position [that] you were a deer in the headlights because you knew if you disclosed your role as an active participant in the fraud you would have lost your chartered accountants designation for life and you would have faced more charges, Greenspan said. You have manipulated everyone with this totally illogical position and you are trying to manipulate this court.
Absolutely not, sir, Messina replied.
Greenspan has yet to present any evidence to show that Messina was an active participant in cooking Livents books.
Rather than a deer caught in the headlights, there were numerous examples where Messina had stood up to Livent senior managers. These are many instances where you go up against Garth and Myron or threaten to quit, but never once did you threaten to quit over the fraud, Greenspan charged.
Messina threatened to resign in the fall of 1997 when Livent tried to improperly book revenue from a Pantages theatre deal and once even went so far as to type up a letter of resignation in April 1998, citing the continued verbal abuse dished out to her by Gordon Eckstein. You were willing to quit over Gordon Eckstein, but not over the fraud? Greenspan asked.
No, replied Messina. I was a single mother. I was afraid.
In detailing the times that Messina stood up to Livent managers, Greenspan seemed to miss a couple of key examples from Messinas previous testimony. One came in the first quarter of 1998 when she wrote a memo to Drabinsky and Gottlieb saying she would no longer support the alleged accounting manipulations and insisted the company clean up its books. The second came a few months later when Messina allegedly defied Drabinsky and told new Livent managers about millions of dollars in manipulations the former Livent CEO made to the companys financial projections.
When it comes to trying to convince the judge that Drabinsky and Gottlieb were not the architects of Livents alleged fraud, perhaps its not hard to understand why Greenspan didnt choose those examples.
The trial continues Wednesday.