In US District Court in Boston, a federal jury has decided that Goldman Sachs (GS) isn’t at fault for the $250M sustained by the owners of Dragon Systems Inc. after they sold their speech recognition company to Lernout & Hauspie Speech Products for $580M. Goldman had served as adviser to Dragon over the deal.
L & H, which is based in Belgium, went bankrupt after the acquisition amidst reports that it was inflating its sales figures and revenue and fabricating customers. The company’s top executives went to jail.
Plaintiffs Janet and James Baker, who own Dragon, had accused Goldman of negligence for failing to detect the fraud that was taking place L & H. Their lawyer claims that the financial firm took the job despite lacking the experience needed to properly sell this type of technology company. Dragon paid Goldman $5 million for its services. (The Bakers have already settled other cases related to the L & H acquisition of Dragon for $70M.
Meantime, Goldman’s legal team has argued that while it was the bank’s job to serve in an advisory capacity during the acquisition, discovering whether/not crimes were being committed at the Belgian company was not. They also contend Dragon disregarded Goldman’s advice that it should retain outside accountants to examine L & H’s books and, instead, entered into the sale too fast.
The federal jury has cleared Goldman of a number of charges, including claims involving breach of fiduciary duty, negligence, intentional misrepresentation, and other allegations.
Related Web Resources:
Goldman Slays The Dragon, Forbes, January 25, 2013
Goldman Is Cleared Over a Sale Gone Awry, The New York Times, January 23, 2013
More Blog Posts:
Morgan Stanley & Goldman Sachs Settle Federal Homeowner Foreclosure Complaints for $557 Million, Stockbroker Fraud Blog, January 16, 2013
Goldman Sachs Ordered to Arbitrate Underwriting Dispute Involving $210M in Auction-Rate Securities, Stockbroker Fraud Blog, December 4, 2012
SEC Antifraud Lawsuit Against Goldman Sachs Executive Fabrice Tourre Won’t Be Reinstated, Says District Court, Stockbroker Fraud Blog, December 3, 2012