Friday April 27, 10:27 am Eastern Time
L&H Co-Founders Face Fraud Charges
Co-Founders of Lernout & Hauspie Speech Products Face Fraud Charges
By RAF CASERT
Associated Press Writer
IEPER, Belgium (AP) -- Investigators have charged the jailed co-founders of Lernout & Hauspie Speech Products with fraud, a prosecutor said Friday.
The news came as shareholders learned that the high-tech firm's revenue had been overstated by nearly $100 million more than previously thought.
Jo Lernout and Pol Hauspie were brought in for questioning Thursday by a judge investigating accusations of fraud. They subsequently were charged with falsification of documents and stock manipulation and ordered held pending a court appearance Monday, prosecutor Jean-Marie Coppens said.
The same charges were filed Friday against fellow former board member Nico Willaert, who was also being detained pending the court appearance. At the hearing, a judge will decide whether the three should remain in custody or be released pending trial, Coppens said.
The charges mark a new low for the one time high-flyers, who only a year ago were receiving Belgian royalty at their offices and hobnobbing with the leaders of such giants as Microsoft Corp. (NasdaqNM:MSFT - news) and Intel Corp. (NasdaqNM:INTC - news) Those companies each invested tens of millions of dollars in Lernout & Hauspie, Europe's largest maker of speech recognition and translation software.
The co-founders had already been sidelined for several months, ever since a slew of accounting scandals and fraud allegations sent the stock crashing late last year and forced the firm to seek bankruptcy protection in Belgium, the United States and South Korea.
At the extraordinary shareholders meeting ordered by a bankruptcy judge, new chief executive Philippe Bodson said Lernout and Hauspie's personal legal troubles ``will not have an impact'' on the gathering.
Bodson told shareholders that earnings during the period in question -- from 1998 through the first half of 2000 -- had been overstated by $373 million. The company had previously said revenue was overstated by up to $277 million.
Bodson, who took the helm only this year, said the group earned a total of $162 million during the 2 1/2 years, not the $535 million originally reported.
Bodson declined to comment on new reports of the company's imminent disintegration.
The Wall Street Journal, citing unnamed sources familiar with the situation, reported Friday that the new management has asked investment bank Credit Suisse First Boston to explore selling most of the company's remaining assets to repay more than $600 million in debts. Asked about that report, Bodson said: ``No way I am going to tell you.''
Only 463 shareholders showed up instead of the thousands expected. Because of the lack of quorum, a vote planned on changing how directors are named can not be held, limiting the impact of the meeting.
A year ago, such a situation would have seemed almost unimaginable.
For the past decade, a mix of local pride and belief in the boundless possibilities of high technology drove the fortunes of the two local entrepreneurs up and up. It was a stellar achievement, even at the height of the dot-com craze.
Acquisitions and new ventures kept the company in the news, boosting its value to almost $70 a year ago. Now it goes for little more than a dollar, an overall loss of almost $10 billion.
The bubble burst last summer, when The Wall Street Journal questioned some business activities in Asia. On Nov. 9, the company admitted to past accounting ``errors and irregularities'' -- a term that could cover fraud -- in financial statements for most of the past three years.
The debt-laden company filed for bankruptcy protection while restructuring but a commercial court complained about the ``shabby content'' of the recovery plan.
The company also is being investigated for alleged fraud in the United States. Early this month, accounting giant KPMG accused former officials of Lernout & Hauspie of obstructing its efforts to audit the company, charging it was deliberately given ``false, inaccurate or incomplete information.'' Lernout, Hauspie and Willaert rejected KPMG's contentions.
Many shell-shocked local investors still are looking to recover something.
``Most are here to get their money back. But there is little hope,'' small investor Luc Jacqmin said.
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