LiventWhen Maria

Livent – When Maria…When?: 

Livent – When Maria…When? Case Study by Sudha Periasamy

About Livent Inc.,: 

About Livent Inc., The Live Entertainment Corporation of Canada, Inc., in short, Livent, was a theatre production company. Created by Garth Drabinsky and Myron Gottlieb in 1990. In 1993, Livent taken public. Livent produced famous musicals as Ragtime, Kiss of the Spider Woman, Showboat, Joseph and the Technicolor Dreamcoat and Fosse. Livent became world’s premier live entertainment company.

Peoples….Positions: 

Peoples….Positions Founders Garth Drabinsky & Myron Gottlieb Vice President Robert Webster VP Finance Gordon Eckstein CEO Roy Furman CFO Maria Messina

Losses and Quarrels : 

Losses and Quarrels The manipulations occurred from 1993 to 1998. Garth Drabinsky and Myron Gottlieb were the key persons for manipulations. In 1997 alone Livent faced a loss of $41 million, but the company showed as profit of $13.4 million to the public. In June, 1998, shareholders approved Ex-Disney executive Michael Ovitz take charge. In August, 1998, Drabinsky and Gottlieb were dismissed from Livent and faced a lawsuit of $225 Million.

Maria ! Maria!: 

Maria ! Maria! Maria Messina, Livent’s chief financial officer who joined Livent from Deloitte in May 1996. She began attending the “post-manipulation” meetings with the management in October 1997. She prepared pre- and post-adjustment balance sheet, income statement, and statement of changes in financial condition.

Maria ! Maria ! Continued…: 

Maria ! Maria ! Continued… She distributed these to Drabinsky, Gottlieb and Gordon Eckstein, Livent’s Senior Vice President of Finance. Maria never revealed the fraud to her former colleagues at Deloitte or to the Audit Committee. Maria was competent, demonstrated integrity but not courageous, was intimidated by Garth Drabinsky.

Ethical Dilemma?: 

Ethical Dilemma? Maria was shocked and numbed about the fraud. She questioned her manager, Gordon Eckstein, who mentioned this as “income smoothing”. Completely frozen with anxiety and misplaced loyalty and confidentiality. Maria didn’t face any ethical dilemma, but she wasn’t courageous enough to reveal the fraud.

Whistle had blown!: 

Whistle had blown! Until 1998, Maria did work on manipulated financial statements. Roy Furman was new executive vice president in Livent who took incharge in 1998. Finally in August 1998, Maria revealed the fraud to Roy Furman.

Planned Response?: 

Planned Response? Maria’s response was not appropriate, because she didn’t blew the whistle immediately. But Maria’s response was not a planned one. She was feared, scared of power and not having enough courage to reveal the fraud right away.

What should have done?: 

What should have done? At first, Maria should have denied to prepare the post-manipulation financial statements. When Maria was aware of the frauds, she should have informed to the concern authorities. After informed to the authorities, Maria should have resigned from Livent.

Whistle-Blowing…Right or Wrong?: 

Whistle-Blowing…Right or Wrong? Whistle-blowing : Reporting wrongdoing that is occurring within an organization. Whistle-blowing should be encouraged both in public and private sectors. Companies should encourage internal whistle-blowing which helps to solve problems within the organization before employees feel they must go outside to get action.

Whistle-Blowing…Right or Wrong? continued…: 

Whistle-Blowing…Right or Wrong? continued… Internal whistle blowing can be encouraged by Formal mechanism for reporting violations such as hotlines /mailboxes. Clear communications about the process of voicing concerns such as chain of command, assign specific person to handle complaints. Clear communication about bans on retaliation. Prompt follow-ups and investigations on all allegations of misconduct.

Conclusion : 

Conclusion Maria was not having courage to act in a timely manner. She didn’t have the primary loyalty on the public interest. Finally, she paid a huge price (5 years imprisonment and $250,000 fine) for not playing the fiduciary role.