Garth Drabinsky and Myron Gottlieb allegedly deceived investors with "large-scale fraud" as their Broadway shows dazzled theater-goers during the 1990s, a Toronto courtroom heard Monday.

Livent cofounders Drabinsky and Gottlieb each pled not guilty to two counts of fraud and one count of forgery as their criminal trial began.

"The accused knew that the company's books and records were false," lead prosecutor Robert Hubbard told Ontario Superior Court Justice Mary Lou Benotto in a packed courtroom.

"They knew that the financial statements and documents presented to the public were materially false and misleading," he added.

In his opening statement, Hubbard alleged Drabinsky and Gottlieb knowingly tampered with quarterly financial statements and annual reports between 1993 and 1998 to convert losses into earnings and to inflate Livent's asset value and share price.

Best known in film and TV circles for launching Cineplex theaters in 1979, Drabinsky recently produced the reality series Triple Sensation for CBC. Earlier film productions include award winners The Silent Partner and The Changeling, followed by The Visual Bible: The Gospel of John.

The lead prosecutor said he will call 127 witnesses, including seven former senior Livent employees, to prove the elaborate, alleged subterfuge. The trial is set to occupy six months.

Hubbard also placed 62 volumes of documents on the judge's bench on Monday, each filled with corporate documents that the Crown hopes will prove accounting fraud in many forms, among them sham invoicing, reducing expenses by shifting costs from one financial quarter to another or losing theatrical productions to upcoming shows, or inflating ticket sales for theatrical runs.

By allegedly rolling costs forward, the Crown said Livent accountants acting at the order of Drabinsky and Gottlieb artfully failed to write off expenses in the proper time period, and so inflated earnings and the company's share price.

Hubbard also alleged that Livent kept two sets of books -- a real one that tracked actual production expenses and operating cash flows, and a second, phony set for company directors, auditors and shareholders.

Drabinsky and Gottlieb listened quietly or scribbled on writing pads as the Crown alleged that their accounting manipulations grew in scope and boldness during the 1990s as successive losses on various Broadway shows, including Ragtime and Showboat, began to mount.

The Crown's star witnesses include Gordon Eckstein, Livent's former SVP of finance and administration, who is expected to testify he directed his team of accountants as to how to cook the company's books, at the direction of Drabinsky and Gottlieb.

Also set to take the stand is former Livent CFO Maria Messina, and Grant Malcolm, Livent's former senior production controller, who was charged with keeping track of running expenses as they were understated in a second set of books for the consumption of shareholders.

But for the occasional sneer, Eddie Greenspan, Drabinsky's defense lawyer, was largely silent during Hubbard's opening remarks. As in Conrad Black's recent criminal fraud trial, Greenspan is expected to undermine the credibility of the Crown's witnesses when they begin taking the stand on Monday.

The first witness is expected to be Peter Kofman, a Toronto-based engineer who is expected to testify he submitted false invoices to Gottlieb and Drabinsky to inflate the company's earnings.

Kofman is also expected to tell the Ontario court that he bought blocks of tickets in late 1997 for a run of Ragtime at the Shubert theater in Los Angeles, and was reimbursed by Drabinsky and Gottlieb, both to show the west coast engagement was successful before it shifted to Broadway, and also to fraudulently capitalize the ticket sales in Livent's fixed-asset accounts.