TORONTO _ Livent co-founders Garth Drabinsky and Myron Gottlieb are pleading not guilty to falsifying financial statements and bilking creditors and investors out of millions.

The pleas came today at the start of their long-awaited fraud trial in Toronto, in which both are charged with two counts of fraud and one count of forgery.

The Crown says it will call seven former Livent employees to testify their former bosses directed schemes to boost Livent's financial situation and value.

Prosecutors allege the pair raised $500 million in financing and that the fraud began even before Livent went public.

When charges were initially laid in 2002, Drabinsky and Gottlieb each faced 19 fraud counts.

Most of the charges were subsequently dropped or rolled together by the Crown.

Drabinsky and Gottlieb are alleged to have misrepresented the theatre company's financial health in the nine years before the Toronto-based firm went bankrupt in late 1998.

The Crown's main witness is expected to be Gordon Eckstein, who used to Livent's vice-president of finance.

Eckstein was given a conditional sentence of two years less a day after he pleaded guilty last year to one count of fraud.

He's expected to face a withering cross-examination from defence lawyers Eddie and Brian Greenspan, who represent Drabinsky and Gottlieb respectively. © 2008 The Canadian Press