For years creditors and investors have been looking for ways to sue corporate auditors.
The lawsuit was filed against the audit firm by Livent's special receiver on behalf of the company's creditors and shareholders. Livent lawyer Peter Howard told Ontario Superior Court Justice Arthur Gans that auditors knew they had been lied to on a number of occasions by management at Livent, and therefore should have been far more suspicious and probing when reviewing the company's books and approving key business transactions.
Story continues below advertisement "There were plenty of red flags to indicate the potential for a fraudulent manipulation," Mr.
Howard said in his opening remarks at the trial. Howard said the people working on the audit at Deloitte changed frequently and failed to pass along information about known "risks" of relying on statements of information from company founders Garth Drabinsky and Myron Gottlieb.
Gottlieb were found guilty in of orchestrating a fraud that saw Livent's financial statements misstated every quarter from to They were sentenced to five years and four years in prison respectively, but have since been released on bail.
He said the trial will hear that one of Deloitte's audit partners complained internally in that he had been lied to three times by Livent officials and even suggested Deloitte should quit the audit.
But that audit partner did not know of other problems and other lies from earlier years, Mr. He said such knowledge might have made him far more suspicious and led to a deeper review of Livent's books.
Story continues below advertisement Story continues below advertisement "There was no continuity in terms of the partners and the senior managers over the years," Mr. In a written copy of his opening statement filed with the court, Mr.
McDougall argues Livent has no authority to launch a lawsuit against Deloitte because Livent was responsible for committing the fraud through its most senior executives. The audit work done by the firm met professional standards in place in the s, and could not have detected a fraud that so many people were trying to hide, including multiple levels of Livent managers, Mr.
Story continues below advertisement He said Livent also has no authority to sue on behalf of creditors and shareholders for their losses, saying such a claim goes against basic principles of corporate law. Livent itself also cannot claim losses, Deloitte adds, because the company was assisted and not harmed by the auditor's inability to detect its fraud.
The lawsuit will be closely watched in business circles because there has been legal uncertainty about when — if ever — auditors can be held responsible for failing to detect an accounting fraud at a public company. Shareholders in Canada have faced difficulties suing auditors since a Supreme Court of Canada decision set out narrow parameters for a successful lawsuit.Feb 14, · At Livent, Is Fraud The Thing?
Commission charges was "a multifaceted and pervasive accounting fraud." For her role in helping carry out .
Some types of fraud include false accounting, check fraud, and Internet fraud. Accounting fraud or scandals are business scandals that come from the tampered reports, usually by long time employees or trusted executives in either a large corporation or small business. Livent Inc.'s auditors at Deloitte & Touche ignored "red flags" of fraud and were negligent in their reviews of the company's financial statements, a Toronto court heard Monday.
The Live Entertainment Corporation of Canada, Inc., also known as Livent, was a theatre production company in Toronto, Ontario, begun as a division of the motion picture exhibitor Cineplex Odeon.
The Crown alleged that the two executives ordered accounting employees to cook the books at publicly traded Livent, allowing it to attract more than $ million from investors and lenders. FRAUD Well, here's who we're dealing with: And a brief history of Livent Inc.
Garth & Myron co-found Live Entertainment Inc. x 20 Shortens to Livent Inc. Goes public in Canada Goes public in U.S. U.S. Investors control outstanding stock.