Engineer testifies 'crazy' Livent duo sucked him into phoney invoice scheme

Agreeing to the strategy devised by Drabinsky and Gottlieb, the duo behind such hits as "Phantom of the Opera" and "Showboat," was the only way to get money they really owed him, Peter Kofman said.

"We were always in trouble in getting money and fees paid to us," Kofman told Ontario Superior Court.

"I felt like I was completely trapped."

At times agitated as he recollected events, Kofman told court that in the early 1990s, Drabinsky and Gottlieb, co-founders of theatrical powerhouse Livent, would bill him amounts such as $150,000 for "business" services, then reimburse him.

Crown lawyer Alex Hrybinsky asked if the duo ever delivered such services. Kofman replied: "No."

Court heard the arrangement began casually enough at the request of Gottlieb, but Kofman said he became increasingly caught up in it.

At one point, Kofman said, he went eight months without actually getting paid and his company's financial situation throughout the 1990s remained precarious even though he was working on several of Livent's high profile, glamorous theatre projects.

"I would well up with kind of emotion and anger," he testified about one memo he sent to Drabinsky in February 1996 pleading to be treated fairly. Livent, he said, was "taking a piece out of the wrong guy."

Another memo he sent to Drabinsky indicates that Livent paid Kofman about $4.6 million between May 1, 1991 and April 30, 1992. However, almost $3.9 million was money Kofman had paid Livent for non-existent services, court heard.

"Most of the money was going back to them," Kofman said, adding he didn't actually know where the cash went.

At the same time, he said, Livent owed him some $500,000 and was about a year behind in payments, leaving him feeling "completely beholden" to the duo.

"We had to feed our people," he told the court.

The Crown maintains the bogus invoice scheme was part of a more elaborate ruse in which Drabinsky and Gottlieb would inflate revenues while minimizing expenses. The aim was to boost the bottom line to ensure Livent, as an attractive investment, would ultimately raise $500 million in financing, prosecutors allege.

Drabinsky and Gottlieb have both pleaded not guilty to two counts of fraud and one of uttering forged documents.

In early 1990, Kofman signed a $2-million agreement whereby King Commodity Services Ltd., of which Gottlieb was president, would act as "fiscal agent" for his engineering company.

Kofman said he had no business relationship with King and still has no idea what the company was. But invoices were prepared and the bills paid.

He said he eventually became fed up and wanted to terminate the arrangement before Livent went public in 1993.

Still, Kofman's company ended up working exclusively on "world-class" Drabinsky and Gottlieb projects on Broadway, Chicago and Toronto.

In late 1997, Kofman said he found himself ensnared again when executives asked him to buy large amounts of tickets for "Ragtime" in Los Angeles.

Once again, he said, Livent dangled the "little carrot" of paying him what they actually owed him.

He recalled bitterly how Livent allegedly used his American Express credit card without his knowledge to rack up tens of thousands of dollars worth of ticket purchases, then threatened to leave him hanging when he objected.

"It was just unbelievable," he said.

Kofman said he finally "exploded" when a senior Livent executive refused to cover $5,620.99 he was left short because of the exchange rate.

"You're crazy," he said he told the executive. "Leave me alone. Just let me do what I was brought here to do."

Within a year, Livent went bust and, like many other creditors, Kofman lost "a huge amount" of money.

"It destroyed my career instantly. It was a disastrous situation for me."

Kofman faces cross-examination Tuesday by crack criminal lawyer-brothers, Edward and Brian Greenspan.