The Fraud of Livent Finance

The fraud of Livent finance account started from 1990, when Garth Drabinsky and Myron

Gottlieb operated a kickback scheme with Livent vendors. In those four years, Drabinsky and

Gottlieb received 7 million in kickback. From the internal control, Livent should have separate

responsibility for related operation. The supply purchase process of the company should be

divided among more people to prevent receiving money from kickback. Because the lack of

separate responsibility, Drabinsky and Gottlieb can face directly to the vendors without having

people checking the accounts in the middle. From the external control, company vendors should

be changed from time to time to prevent the connection between employees and vendors. If the

vendors were different every year, it would be hard for certain employees in the company to

receive kickback.

The second fraud is when the company couldn’t achieve the quarterly earning target,

Drabinsky and Gottlieb directed Livent’s accounting staff to do false account. They erased the

recorded expenses and liabilities, reduce the periodic amortization charges and debited salary

expenses and other operating expenses. From internal control, Livent should have rotating

duties to prevent long-term employees cheating on the accounts. If the duty rotation were

applied to the company, it would be harder for Drabinsky and Gottlieb to control the group of

accounting staffs. Also, there should be another group of people attesting all the accounts.

Separating the operation would provide the company accounts more security. Having a certain

group