Garth Drabinsky and Myron Gottlieb were so aggressive in trying to inflate the asset value of their upstart live theater company that they conducted a sham invoicing scheme, Toronto engineer Peter Kofman said Monday, as testimony in the Livent criminal fraud trial got underway.

As the prosecution’s first witness, Kofman told a Toronto courtroom that, starting in 1990, Drabinsky and Gottlieb sent bogus invoices to his company, Kofman Engineering Services Ltd., which he then paid. The same amount of money was then kicked back into the coffers of KESL, plus money for services that the engineering company actually performed, Kofman told Justice Mary Lou Benotto of the Ontario Superior Court.

The Crown contends that the bogus invoicing scheme aimed to inflate the asset value of what was then called Live Entertainment Canada Ltd. before it went public in 1993 as Livent Inc.

Kofman, who appeared uneasy on the stand as he laid out nearly 20 years of business dealings with Drabinsky and Gottlieb, said he did not fully understand the alleged kickback scheme. But Kofman insisted he felt compelled to participate in the accounting manipulation to get paid money he was owed for legitimate services.

‘I felt completely beholden to cooperate to do what I had to do to support my projects and to feed my people,’ Kofman said in answer to Crown questioning.

‘It was always, ‘We’ll get you some money.’ It’s always a carrot. ‘We’ll get you some money for the things you do and you help us out here,” Kofman added, explaining the alleged fraud and kickbacks culminated in his purchase of blocks of tickets in late 1997 to a Los Angeles production of Ragtime.

He was reimbursed for those purchases, he said, but never received the tickets or attended the L.A. engagement before Ragtime shifted to Broadway.

Typical of the alleged scheme were two Dec. 5, 1990 invoices from Drabinsky and Gottlieb that sought $75,000 each for having made, ‘several introductions on your behalf to assist with business solicitations and business arrangements.’

Asked whether those services had been done, Kofman answered point blank, ‘No.’

On Dec. 6, 1990, KESL was reimbursed for the $150,000 paid out, plus $25,000 for project management services that Kofman insisted were performed.

Other allegedly bogus invoices followed one after the other, he said.

‘It was just the continuation of the same theme for a very long time. It was just a way to get paid for services,’ Kofman testified.

During 1992 and 1993, Kofman said Drabinsky and Gottlieb reimbursed his company through cheques from King Commodity, which was to act as a ‘fiscal agent’ for KESL.

Kofman said King Commodity never performed any services for KESL. But in a possible opening for the defense, Kofman conceded that he ‘didn’t dive in it perhaps as much as I should have,’ when Drabinsky and Gottlieb began to reimburse payment of allegedly bogus invoices through King Commodity.

‘I probably took it at face value,’ he added under Crown questioning.

In 1998, after alleged accounting manipulations at Livent began to unravel under new management led by Michael Ovitz, Kofman said he met with Drabinsky and Gottlieb to seek answers as to why he was suddenly part of a police probe on both sides of the border.

Kofman said the Livent duo told him the invoicing was done by a private company and that the money went back into projects that he oversaw, so that he had nothing to worry about.

Kofman’s opening evidence is crucial to prosecution’s chronological presentation, as it paints a picture of accounting fraud that allegedly built in size and boldness as Livent staged Broadway productions during the 1990s and was eventually bought by Ovitz in 1998.

Drabinsky and Gottlieb last week pled not guilty to two counts of fraud and one count of forgery over their role in allegedly bilking Livent investors of hundreds of millions of dollars. Drabinsky is best known in film and TV circles for launching Cineplex and recently producing the reality show Triple Sensation for CBC. The trial continues Tuesday.