Strategy

Livent trial: Whistleblower or manipulator?

The defence grills former Livent CFO Maria Messina.

Of the cast of characters who have appeared at the criminal fraud trial of Livent Inc. co-founders Garth Drabinsky and Myron Gottlieb, none is as complex or baffling as former chief financial officer Maria Messina. Prosecutors have portrayed her as a courageous whistle-blower who, after finding herself an unwitting participant in the alleged widespread accounting fraud at Livent between 1993 and 1998, spent months struggling to find the fortitude to stand up to Drabinsky and Gottlieb — men Messina describes as “ruthless” and “zealots” in their pursuit of what they wanted. “I did not have the strength to go up against Mr. Drabinsky and Mr. Gottlieb,” Messina testified. “They were men of money, power and influence. I was nobody.”

Of course, lawyers for Drabinsky and Gottlieb have a different perspective. During nine days of cross-examination — more than twice the time David Radler spent being interrogated at the Conrad Black trial last year — defence attorneys Edward and Brian Greenspan tried to paint Messina as a shrewd and cunning manipulator who fabricated evidence and colluded with other witnesses to frame Livent’s founders with “scripted” testimony.

Messina, the defence charges, is little more than a professional character assassin who, since the collapse of Livent in 1998, has received $325,000 per year working as a consultant for the receiver handling the bankruptcy and for Stikeman Elliott, the Toronto-based law firm suing Drabinsky, Gottlieb and former Livent auditors Deloitte & Touche. “For lawsuits and testifying against Garth Drabinsky and Myron Gottlieb, you got nearly $3 million,” Edward Greenspan told Messina. “You are in the Stikeman Elliott witness-protection program. The highest-paid witness in the country.”

Which characterization will prevail is up to Madam Justice Mary Lou Benotto. Neither is a complete portrait of the petite 42-year-old chartered accountant who took down Livent’s founders. And while Messina’s testimony has been compelling, when it comes to whistle-blowers, she is an unlikely hero.

Before Messina joined Livent in 1996, she worked at Deloitte & Touche auditing Livent’s books — almost from the theatre company’s inception. She testified she was not involved in putting together Livent’s quarterly financial statement until July 1997, when she first discovered that managers were allegedly burying massive losses on the company’s books. Even after allegedly witnessing Drabinsky and Gottlieb personally order Livent managers to cook the books, she remained silent for more than a year. Messina would not fully disclose what she knew until August 1998, when Drabinsky and Gottlieb stepped aside after selling a controlling stake in Livent to former Hollywood mogul Michael Ovitz.

During that time, Messina did not disclose her knowledge of the alleged fraud to regulators, the company’s auditors or board of directors. She never even disclosed the full extent of the alleged fraud to her own lawyer, whom she hired to advise her. That failure to disclose is confounding, and it’s the area defence lawyers have attacked most vigorously. After all, she knew many of the auditors that worked on the file — and had even dated one of the senior Deloitte partners in charge of the audit. “I was completely numb. It was complete shock and disbelief,” she testified. “I panicked, and I was completely immobilized by fear.”

But during that period, Messina carried on extensive conversations with the auditors to try to convince them to get tough with Livent and force the company to adopt more conservative accounting, she testified. Many of those telephone conversations were carried out in secret from unoccupied offices at Livent or from her home, since she feared her office was bugged, Messina told the RCMP in a 1998 interview. But her efforts were frustrated when Deloitte continued to give its stamp of approval to many of Livent’s aggressive accounting transactions. “I wanted to negate the effects of the fraud,” she testified.

Defence lawyers have pounced on her lack of disclosure — and the lack of disclosure from other Livent accountants — to suggest that there was no fraud to report, or that Messina was an active participant in a fraud that Drabinsky and Gottlieb knew nothing about. But Messina had another theory. In 2001 testimony before the Institute of Chartered Accountants of Ontario, Messina noted that many of the Livent accountants involved in the alleged fraud had similar personalities: introverted and hard-working, but lacking in confidence and easy to bully. “The only odd hire appeared to be me,” she noted in the testimony. “I went on to say that I guess that’s how [Drabinsky and Gottlieb] saw me as well,” Messina told the court when confronted with the testimony by Brian Greenspan. “I was naive. I didn’t know much about business,” she said. “That made me the perfect candidate…the perfect front man.”

The trial continues.