Except for the fact that President Bill Clinton is in it, there is little to distinguish the photograph marked as Exhibit 34 in the criminal fraud trial of Livent founders Garth Drabinsky and Myron Gottlieb. In the photo, taken on April 24, 1998, Clinton stands between Drabinsky and an attractive blond woman in a grip-and-grin pose that he has undoubtedly repeated thousands of times with major political contributors, visiting dignitaries or minor celebrities looking for a souvenir of their brief encounter with the most powerful man in the world.
But this is no routine presidential snapshot. The photo — and events surrounding it — has been the subject of some of the most dramatic and contentious testimony in the nearly five-month-long trial currently underway in a Toronto courtroom. According to defence lawyers, the photo and other corporate records prove that Drabinsky could not have attended a key 1998 meeting where witnesses say he allegedly discussed plans to manipulate the now-defunct theatre production company’s first-quarter financial statements. The witnesses are not just mistaken about Drabinsky’s attendance at the meeting, the defence contends, they are involved in a complex conspiracy to frame Drabinsky and Gottlieb for one of Canada’s most notorious frauds.
The players in that conspiracy continue to grow. In mid-September, defence lawyer Brian Greenspan confronted former Livent controller Chris Craib on the stand, contending that Livent’s attorneys at the prestigious Toronto law firm of Stikeman Elliott LLP had altered evidence to make it appear that his client, Gottlieb, attended the 1998 meeting in question. Craib is the last major prosecution witness and one of only three people who testified that they had personally witnessed Drabinsky or Gottlieb direct the alleged accounting fraud.
“I have no knowledge of this,” Craib told Greenspan after the lawyer showed him discrepancies between the audio tape of his Stikeman interview and the written transcript that omitted the fact that Gottlieb had not attended the meeting.
“No knowledge of this? You are part of it. Part of the effort to frame Mr. Gottlieb,” Greenspan said.
What is not under dispute is that Drabinsky actually met Clinton on April 24, 1998, at a Ragtime-themed Democratic Party luncheon held in a Washington, hotel. The theatre impresario flew to Washington on Livent’s corporate jet early that morning and returned to Livent’s Toronto offices the same afternoon. After that, pretty much everything is the subject of fiery debate. Even the relationship between Drabinsky and the woman in the luncheon photo is a source of controversy.
Drabinsky’s lawyer Edward Greenspan identified the mystery blond as his client’s then-girlfriend, when he first presented the photo to Gordon Eckstein, Livent’s former senior vice-president of finance and administration — and one of the three people who allegedly attended that pivotal meeting. A stunned silence descended on the courtroom when Eckstein remarked that the woman was actually Drabinsky’s mistress.
“Why would you say that?” Greenspan asked.
“He was married at the time,” Eckstein explained.
“He was separated,” Greenspan shot back.
“Not when he started seeing her,” Eckstein said.
Eckstein went on to explain that the woman had been the subject of much discussion around the office. Drabinsky let her stay in one of Livent’s corporate apartments, and when she didn’t like the layout of the apartment, Livent paid to have it redecorated, Eckstein told the court. It may be the only time there has been an allegation of marital infidelity involving Bill Clinton where Clinton was not the one doing the cheating.
Eckstein testified he attended that April 1998 meeting, but could not remember the exact time — or even the date — of the meeting. Since the start of the trial, defence lawyers have portrayed Eckstein as the real mastermind behind Livent’s allegedly fraudulent accounting scheme; they suggest he cooked the company’s books without Drabinsky’s or Gottlieb’s knowledge or approval. Eckstein testified that all the alleged accounting manipulations were done on the strict orders of Drabinsky and Gottlieb.
While Eckstein’s testimony about the April 24 meeting was vague, Chris Craib’s recollection is as detailed as it is problematic. As controller, Craib was not usually invited to management meetings, but said he was dragged into that particular one after giving Eckstein a copy of the Livent first-quarter financial “executive summary” he had routinely produced. Eckstein told Craib: “I’m not doing this alone; you are going down with me. I’m not going to take the fall for these guys.”
Prosecutors have introduced numerous copies of those “executive summaries,” many covered in what is allegedly Drabinsky’s distinctive handwriting. The summaries are simplified versions of Livent’s financial statements and clearly show that while Livent was telling investors and regulators that it was making money, in reality, the company was losing millions of dollars every year. The summaries even break out tens of millions in expenses that were “rolled” into future periods or buried in the company’s fixed assets.
At the April 24 meeting, Craib testified, he took notes as Drabinsky allegedly ordered Eckstein to slash about $20 million from Livent’s expenses in an effort to transform $18 million in actual losses into a phantom profit of about $2 million. Craib testified he had been aware of Livent’s accounting shenanigans for months but told himself it was not his problem since he had nothing to do with the actual accounting manipulations. That all changed when he attended that April meeting, he told the court. “I was in utter shock. I dry-heaved because I finally understood what was occurring in front of me,” Craib testified. “I was terrorized by it. I was almost physically ill.”
After the meeting, Craib said, he wandered around the Yorkville neighbourhood where Livent’s offices were located for about an hour. He rented a car (to pick up friends who were arriving at the airport later that night from South Africa) and returned to Livent’s offices around 5 p.m. He said Eckstein phoned him and asked him to bring a clean version of the document Eckstein and Drabinsky had been looking at during the meeting. Craib said he delivered the document and saw other Livent accountants entering Eckstein’s office.
Every time Craib has told the story, he has said that traumatic meeting occurred early in the afternoon — sometime around 2 p.m. He knows this, he says, because at one point, Gottlieb popped his head into the office and said he could not stay because he had a 2 p.m. conference call.
The problem is, the meeting could not have happened as Craib described it, defence lawyers insist. At 2 p.m., Drabinsky was nowhere near Livent’s Toronto office. In fact, he wasn’t even in the country. At that time, Drabinsky was still aboard Livent’s corporate jet, returning from his lunch with Bill Clinton. According to the company’s flight records, Drabinsky’s plane did not land at Pearson International Airport in Toronto until 3:30 p.m. The flight received telephone clearance from Canadian customs at 3:35 p.m. and Drabinsky was in his limousine heading back to the office sometime between 3:45 and 3:50 p.m. “If you pinpoint the meeting at two o’clock then you are a liar,” Greenspan told Craib.
But Craib insists he is not lying; he merely remembered the wrong time for the meeting and got the events of the traumatic day jumbled in his mind.
“I’m not a liar. I can be wrong,” Craib replied.
“People who are wrong can be liars,” Greenspan retorted.
In the end, few of the alleged manipulations discussed at the meeting were implemented. It was not necessary since Livent agreed to take a $27.5-million writedown as part of a deal to sell a controlling stake in the company to former Hollywood mogul Michael Ovitz. As part of the deal, Drabinsky and Gottlieb turned over day-to-day management of the company to Ovitz representatives.
Defence lawyers insist that Craib fabricated the April 1998 meeting with his friend and confidante, Maria Messina, Livent’s former chief financial officer, in an effort to frame Drabinsky and Gottlieb and deflect attention away from their own participation in the alleged fraud. Defence lawyers spent more than six days grilling Craib relentlessly about that April meeting and picking apart inconsistencies in the statements he has given over the past decade.
The lawyers have landed some solid hits on the chartered accountant. For instance, even if Drabinsky was back in Livent’s office that April afternoon, there was not enough time for the meeting to have actually occurred once you add in the hour Craib spent wandering around Yorkville in a daze, his renting of a car and his meeting with Eckstein at 5 p.m. Also, some of the adjustments listed in Craib’s meeting notes had already been entered into Livent’s computerized accounting system the day before the meeting, suggesting that Eckstein had made the manipulations before getting approval from Drabinsky. And Craib has told different stories about those notes he says he took during the meeting. He originally told the new Ovitz managers that he didn’t take any notes, but later changed his story when he says he stumbled on the notes in his office.
Still, the defence’s conspiracy theory might be a tough sell for Madam Justice Mary Lou Benotto, who is overseeing the case without a jury. After all, Drabinsky and Gottlieb are accused of manipulating Livent’s books since the company’s inception in 1990 — not just the first quarter of 1998.
The conspiracy theory didn’t work last year when a judge dismissed a $61-million civil suit filed by Myron Gottlieb against Livent, its Stikeman lawyers, Ovitz and several others. Gottlieb accused the group of conspiring to frame him, a claim Stikeman called “highly implausible.”
And this is no lie that Messina and Craib concocted months after the fact, when Drabinsky and Gottlieb were already implicated in the alleged fraud. They would have had to make up the story in April, when Drabinsky and Gottlieb were still their bosses and still regarded as well-respected entrepreneurs — not accused criminals.
Craib’s disclosure of the meeting to Messina finally prompted her into action, she told the court. She told her lawyer about the plan to manipulate Livent’s books (although she did not mention to the lawyer that she had known about the alleged manipulations for months and done nothing to stop them). She wrote a memo to the Livent founders about the meeting and threatened not to support the company’s financial statements to either the auditors or board of directors.
The defence’s conspiracy theory is a bold move. If the judge believes Craib and Messina conspired to make up the story about the April 24 meeting, then she must logically ignore not only their testimony but also that of Eckstein, who also said he attended the meeting. That could cripple the prosecution’s case since Craib, Messina and Eckstein are the only witnesses who testified to personally seeing Drabinsky direct the alleged accounting manipulations at Livent.
In a final ironic twist, the photographer who took the picture of Clinton and Drabinsky told Canadian Business he is still waiting for Drabinsky to pay him for it. Edward Greenspan suggested that perhaps Drabinsky thought the photo was a gift from Clinton. If the picture helps defence lawyers convince the judge that their client is not guilty, that photo could be the best gift the president has ever given.