BOSTON Jan 15 A federal jury in Boston could
begin deliberations as early as Thursday on whether Wall Street
banking giant Goldman Sachs Group Inc was liable for the
botched acquisition of speech recognition software company
Dragon Systems in 2000.
Dragon's founders have accused Goldman of being negligent
after Belgium-based Lernout & Hauspie paid $580 million in stock
for Dragon and then went bankrupt.
It wasn't the job of Goldman bankers to sniff out the
accounting fraud that ultimately doomed Lernout & Hauspie and
made the stock received by Dragon founders Jim and Janet Baker
worthless, defense attorneys have argued.
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.
U.S. District Judge Patti Saris on Tuesday told jurors they
could begin their deliberations as early as Thursday after
hearing closing arguments and getting her instructions on the
law in the case. Tuesday marked the trial's 18th day of
Meanwhile, in a videotape shown to jurors, Ellen
Chamberlain, who was Dragon's chief financial officer, recalled
how the company was on the verge of insolvency before the deal
with Lernout & Hauspie closed. Dragon was making payroll, but
the company was going to have to borrow money to continue to do
so, she said.
Chamberlain also said Dragon had to restate its 1999
financial results after the discovery of "channel stuffing." The
term refers to flooding vendors with excess products so the
company can book higher revenue.
Before the deal closed, Dragon executives also were
concerned that they did not have Lernout & Hauspie's most recent
audited financial statements. But Dragon was told that Lernout &
Hauspie had no open issues with the U.S. Securities and Exchange
Commission over accounting issues. Dragon questioned L&H's spike
in Asian revenue.
Had there been issues, Dragon would have pushed for the deal
to be restructured as a cash sale rather than an all-stock
transaction, Chamberlain said.
The case is Baker v. Goldman Sachs & Co., 09-cv-10053, U.S.