Livent president Myron Gottlieb "smirked and looked away" when his corporate controller asked if he wanted her to lie to a new management team about financial irregularities, she told his fraud trial.
Diane Winkfein testified yesterday she had already told her immediate boss, senior finance vice-president Gordon Eckstein, that she would no longer make fraudulent adjustments to Livent's books unless the new managers, set to take over in June 1998, were aware of it.
She said she asked Eckstein to tell Gottlieb and Livent chair Garth Drabinsky as much.
Some time later Gottlieb told her, "Yes, we had had some difficulties, and he had seen it before and he said he had been on a board of directors ... and that the board had handled it in an orderly fashion and there had been no damage to the share price," Winkfein told prosecutor Robert Hubbard.
He told her "new management would be too busy ... and that he would be handling the financial statements for the second quarter," she testified. "I said, `Does that mean you want me to lie to new management?' And he didn't answer. He smirked and looked away and ... ended the conversation."
Gottlieb, 64, and Drabinsky, 58, have pleaded not guilty to fraud and forgery at Toronto-based Livent.
Winkfein said she manipulated the books under Eckstein's orders between 1993 and 1998 to increase reported profits. The fraud, she said, was "organic. It kept growing bigger and more sophisticated."
She said she understood Drabinsky ran Livent and "very little happened without his knowledge or approval." At this point Drabinsky's lawyer, Edward Greenspan, objected, calling her evidence "double hearsay and triple hearsay."
In May 1996, when Livent hired chartered accountant Maria Messina, Eckstein informed staff they wouldn't tell her of the fraud at first, "and when she was hooked, we would slowly let her in," Winkfein said, adding in the summer of '97 Eckstein asked her to tell Messina.
"We started to go through some of the things we had been doing and she kept saying, `Oh my God. Oh my God.' She was clearly distressed."
The trial continues today.
