When does an inconsistent answer from a witness in court rise from an overly general statement or a genuine mistake to become an out-and-out lie? That’s the answer Edward Greenspan is trying to get during his grueling cross-examination former Livent senior accountant Gordon Eckstein.
Eckstein spent nearly four days on the witness stand telling prosecutors about how Livent founders Garth Drabinsky and Myron Gottlieb were the masterminds of an alleged massive accounting scam that stretched back to the theatre company’s earliest days. But Greenspan has spent much of the past week picking at inconsistencies in Eckstein’s testimony in an effort to suggest that Eckstein is the real architect of the fraud that eventually destroyed the company.
Greenspan has focused his attack on one specific period four days in April of 1997 when Livent was finalizing its first quarter financial results. During that period, the company transformed more than $13 million in losses into $5 million in profits through a serious of inappropriate accounting adjustments, Eckstein testified.
In earlier testimony, Eckstein told the court that he was instructed to put together proposed accounting adjustments to bring the company’s financial results as close to budget as possible and then review those proposed manipulations with Drabinsky and Gottlieb during the company’s quarterly financial meetings. Only after the senior executives approved the allegedly inappropriate adjustments would Eckstein instruct his staff to go about cooking the company’s books.
Greenspan got Eckstein to concede that the meeting must have taken place sometime between April 24, when a document with Eckstein’s handwriting outlining potential accounting manipulations was produced, and April 27 when those improper financial manipulations were entered into the company’s computerized accounting program.
There’s just one problem: neither Drabinsky nor Gottlieb were in Toronto to attend a meeting during a period when Eckstein says the men approved the manipulation of the company’s books. “I’m going to suggest to you that you never met at all in connection with this,” Greenspan said. “You inputted all of the manipulations and there was no meeting.”
“That’s not true, we always met,” Eckstein testified. “We always met at the quarterlies.”
Greenspan acted with incredulity when Eckstein suggested that since it was impossible for the meeting to have taken place at Livent’s offices in Toronto he may have flown down to New York for the meeting. “I suggest to you that you just made that up,” he said.
Now, were Eckstein’s answers untruthful when it came to the details of the meeting, or is it even reasonable to expect someone to remember the details of a single meeting held more than a decade ago? Your opinion and $1.79 will get you a cup of coffee from the Starbucks down the street from the University Avenue courthouse where the trial is being held. Ultimately, that is what the Madam Justice Mary Lou Benotto will have to decide.
The confrontation was similar to one Greenspan made on Wednesday regarding the preparation of Livent’s first quarter 1998 financial statements. Drabinsky could not attended a meeting to approve accounting manipulations during that period since he (and his “mistress”) were in Washington at the time having their picture taken with then president Bill Clinton.
Eckstein insisted that the meetings did indeed take place and refused to budge when Greenspan suggested that Drabinsky’s absence suggested that Eckstein had done the manipulations without the approval of Livent’s senior managers.
Greenspan also questioned Eckstein about why Drabinsky and Gottlieb would have allowed accountants from KPMG representing former Hollywood super-agent Michael Ovitz to pore over Livent’s books if he was aware of the widespread accounting fraud. “This should have been his worst nightmare?” Greenspan said. “I suggest to you that Mr. Drabinsky wasn’t worried because he had no idea where you were booking these things You were on a frolic of your own.”
“That’s totally incorrect,” Eckstein replied. Drabinsky and Gottlieb weren’t worried about auditors after all, they had been fooling Deloitte and Touche for years, he said.
If Livent was the criminal enterprise that Eckstein suggested it was certainly a strange one, Greenspan suggested. After all, they didn’t tip Eckstein off about the pending Ovitz transaction that could have given him time to prepare to hide the company’s losses and they even fired one of their alleged co-conspirators Robert Topol after they discovered he was stealing from the company. “It’s got to be a strange way to run a conspiracy,” Greenspan said.
Strange indeed. But whether or not the inconsistencies and questions raised by Greenspan are enough to convince Madam Justice Mary Lou Benotto to disregard Eckstein’s previous testimony has yet to be seen. Edward Greenspan told the court he will wrap up his cross-examination on Monday and turn the witness over to Brian Greenspan.