(Corrects to change regularities to irregularities in the lead)
* Goldman on trial for its advice to Dragon Systems
* Speech recognition pioneers accuse bank of shoddy work
* Opening arguments at Boston trial expected Monday
By Tim McLaughlin
BOSTON, Dec 10 A U.S. federal judge on Monday
ordered Goldman Sachs Group Inc to take down statements
from its website related to its representation of Dragon Systems
in a 2000 sale that blew up when acquirer Lernout & Hauspie went
bankrupt after accounting irregularities emerged.
A two-month jury trial in the civil case is expected to
begin Monday afternoon in U.S. District Court in Boston. Lawyers
for Dragon's founders are expected to accuse the iconic Wall
Street bank of negligent misrepresentation and malpractice in
their opening arguments.
U.S. District Judge Patti Saris began Monday's proceedings
by chastising attorney Alan Cotler for talking to a Boston Globe
reporter on the eve of the trial. Cotler is representing Janet
and James Baker, speech recognition pioneers who agreed to sell
Dragon to Lernout & Hauspie in the $580 million all-stock deal
that ultimately fell apart.
"You cannot talk to the press," Saris told Cotler, who made
an apology to the court. "I don't know why you did."
The judge also expressed concern that Goldman Sachs' public
relations team had been making comments to the press on deep
background. "That seems to be the case," the judge said.
In addition, Saris ordered Goldman Sachs attorneys to take
down the bank's response on its website to a July 15 New York
Times story about the case.
"Right now, there's a complete block on talking about the
case," Saris told several lawyers assembled in her courtroom in
U.S. District Court in Boston.
In 1999, Dragon Systems hired Goldman as its financial
adviser. The company was struggling and a potential acquirer
opted not to pursue a deal, according to Goldman's defense in
the case. The bank says the claims brought by the Bakers are
Belgium-based Lernout & Hauspie later offered to buy the
suburban Boston company for cash and stock. But without seeking
Goldman's advice or consulting with her board, Janet Baker, a
founder of the company, agreed instead to an all-stock deal,
according to Goldman.
Goldman says it recommended to Dragon that it hire
professionals to do an extensive review of Lernout & Hauspie's
accounting procedures. Dragon chose not to do that, Goldman
In May 2001, U.S. Marshals arrested Gaston Bastiaens, a key
figure at L&H, at his home in suburban Boston. He was picked up
on a Belgian warrant that accused him of fraud, insider trading,
stock market manipulation and accounting law violations.
Bastiaens was CEO of Lernout & Hauspie when the 2000 fraud
allegations sent the company's stock into a tailspin, erasing
nearly $10 billion in shareholder value while forcing the
company into bankruptcy protection.
(Reporting By Tim McLaughlin; Editing by Nick Zieminski)