Goldman bankers doomed Dragon sale: lawyer
BOSTON (Reuters) - Four "bottom of the barrel" investment bankers from Goldman Sachs doomed Dragon Systems' sale to Lernout & Hauspie nearly 13 years ago, a lawyer for the software company's founders said on Thursday in his closing argument.
"Dragon was small potatoes. So (Dragon) got Goldman's D-team," lawyer Alan Cotler said in a scathing rebuke of the iconic Wall Street bank. "They got the bottom of the barrel."
The 20th day of the trial in U.S. District Court in Boston also featured John Donovan, Goldman's top lawyer in the case, who portrayed Dragon as a desperate company looking for a white knight, even though top executives had misgivings about Belgium-based Lernout & Hauspie's ethics and skyrocketing revenue in Asia.
"Is it the role of the investment bank to detect fraud?" Donovan said in his closing argument. "The answer is, 'No.' You turn to accountants for accounting questions."
Dragon founders Jim and Janet Baker have accused Goldman Sachs Group Inc of being negligent after Lernout & Hauspie paid $580 million in stock for Dragon and then went bankrupt in the wake of an accounting scandal.
It wasn't the job of Goldman bankers to sniff out the accounting fraud that ultimately doomed Lernout & Hauspie and made the remaining stock held by the Bakers worthless, Donovan argued. He also pointed out that the plaintiffs previously received $77 million from "the people actually responsible for the fraud" in a case several years ago against L&H, their bankers and accountants, that did not involve Goldman Sachs.
The Bakers owned 51 percent of the company but only were able to sell a few million dollars worth of L&H stock before the company collapsed in an accounting fraud. The Bakers and two other early Dragon employees are seeking several hundred million dollars in damages. The jury could begin deliberations as early as Thursday afternoon.
Donovan criticized Janet Baker, who had been Dragon's chief executive and then just chairman, for cutting Rich Wayner, Goldman's lead banker on the assignment, out of the loop. She began negotiating with L&H directly and hashed out an all-stock deal on a cocktail napkin. Donovan said Janet Baker acted as her own investment banker and blamed Goldman for her own decisions.
In addition, Donovan said Wayner implored Dragon to have an outside accounting firm do a deep dive into Lernout & Hauspie's financial statements. That advice fell on deaf ears, though, Donovan said.
Cotler, however, portrayed Wayner, who left Goldman more than a decade ago, as uncaring and unwilling to scrutinize Lernout & Hauspie's revenue projections.
"Wayner didn't care. He was thinking about starting his own company. He wasn't connecting the dots," Cotler said.
He also said Goldman's team misrepresented one of its London-based analysts as an expert on Lernout & Hauspie. That analyst later testified he wasn't following the company when he got on a conference call with Dragon executives and made positive comments.
In fact, he said he didn't know about a big spike in Lernout & Hauspie's revenue in Asia. Had he known that, he said he would have been skeptical.
"That's negligence and misrepresentation," Cotler told jurors.
Cotler also said Wayner didn't tell Dragon executives he was dissatisfied with the information he was getting from Lernout & Hauspie.
"They didn't give financial advice," Cotler said. "They acted like they were giving financial advice."
(The story corrects to knight, not night, in third paragraph)
- Housing, jobs data weaken, but overall economic picture still upbeat
- Putin critic Khodorkovsky in Germany after pardon |
- Target probe eyes overseas hackers; stolen cards for sale online
- Pizza outlet attacked as India, U.S. fail to cool diplomat row |
- Target cyber breach hits 40 million payment cards at holiday peak |