Online Software News
h4>Livent software was altered, trial told
By Janet McFarland
Wednesday, July 16, 2008
TORONTO — A former Livent Inc. computer technician says he modified the company's accounting software to allow changes to be made that could not be detected by the external auditors.
Raymond Cheong, who was Livent's manager of information services, told a Toronto court Wednesday he was first asked to make software modifications in 1990 and continued doing so until 1997, making a total of seven different programming changes to the accounting software system.
He said most of his instructions came from accounting controller Diane Winkfein, but said he was told by former senior vice-president of finance Gordon Eckstein to do what Ms. Winkfein required.
He added he was told if the company's auditors ever asked about changes to the computer system, he should refer their questions to Mr. Eckstein.
When he was later asked by auditors whether any changes had been made to the computer system, “we responded there weren't any made that were significant,” he said.
Mr. Cheong testified at the trial of Livent co-founders Garth Drabinsky and Myron Gottlieb, who are charged with fraud and forgery in connection with misstatements of Livent's financial statements between 1993 and 1998. Both men have pleaded not guilty and have suggested others at Livent conducted the fraud without their knowledge.
In court Wednesday, Mr. Cheong testified he removed controls from the software package to allow various accounting entries to be “unposted” and moved.
“It means taking a [general ledger] transaction that had been posted to a specific period and putting it back into a state where it can be posted again to another period or another account,” he said.
He said he made other computer changes to allow invoices to be altered more easily in the system. Before designing that new program, he said he was required to spend long periods of time at the end of every quarter manually changing individual invoices in the system.
He said he wasn't told specifically why he was making the changes, but was told to do it in his office with the door closed.
“It was definitely wrong,” he testified. “And it became a nuisance because it became voluminous.”
He also said he “became more concerned” about the changes as they became a regular occurrence every quarter of the year.
Mr. Cheong testified Mr. Drabinsky and Mr. Gottlieb did not have access to the accounting software program and did not know how to use computers, including their e-mail.
He said he had virtually no contact with either of the accused, although he would occasionally get phone calls from Mr. Drabinsky when the computer system crashed and he could not access documents. He said he was “aggressive in his tone” when he was unhappy.
Mr. Drabinsky's lawyer, Edward Greenspan, suggested to Mr. Cheong that Mr. Drabinsky was frustrated at those times, but his complaints were not directed at Mr. Cheong personally. He also suggested it was unlikely Mr. Drabinsky knew who he was when he worked at Livent.
“It's possible, yeah,” Mr. Cheong said.
Mr. Cheong described the work environment at Livent as “bittersweet.”
“I enjoyed working there because of the productions, the shows, the excitement of building new theatres .... the parties,” he said. “On the other side, it was hard work because we were making these changes.”
And, he added, Mr. Eckstein was “intimidating and abusive” as a manager.
“He would swear a lot at me, and called me an idiot once or twice,” he said. “He'd embarrass me at meetings in front of vendors.”
Mr. Cheong completed his testimony Wednesday, and the trial will resume Thursday with more testimony from former Livent controller Grant Malcolm. Mr. Malcolm began testifying earlier this week, but could not continue on Wednesday due to a medical appointment.
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