* Lawyers make closing arguments in Goldman negligence trial
* Goldman bankers described as "D-team"
* Goldman lawyer says Dragon CEO ignored accounting advice
* Jury could begin deliberations later on Thursday
By Tim McLaughlin
BOSTON, Jan 17 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
"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,
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
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
Cotler also said Wayner didn't tell Dragon executives he was
dissatisfied with the information he was getting from Lernout &
"They didn't give financial advice," Cotler said. "They
acted like they were giving financial advice."