Goldman cleared of all charges in doomed Dragon sale

Wed Jan 23, 2013 6:07pm EST
 
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By Tim McLaughlin

(Reuters) - A federal jury on Wednesday gave Goldman Sachs Group Inc GS.N a sweeping legal victory in the $580 million sale of Dragon Systems Inc to Lernout & Hauspie, saying the Wall Street bank was not negligent in arranging a deal that ultimately collapsed 13 years ago.

The jury cleared Goldman of claims of negligence, intentional misrepresentation and breach of fiduciary duty, and others, in the civil case, according to the verdict announced in U.S. District Court in Boston.

Dragon founders Jim and Janet Baker, pioneers in the field of speech recognition software, accused Goldman investment bankers of being negligent in the 2000 sale of their company to Belgium-based Lernout & Hauspie, which collapsed in a massive accounting fraud. The Bakers and two early Dragon employees sought several hundred million dollars in damages.

"We are pleased the jury rejected these claims. We fulfilled all our advisory duties to Dragon Systems," Goldman Sachs spokeswoman Tiffany Galvin said.

John Donovan, Goldman's lead lawyer on the case, declined to comment. But on a frigid day outside the federal courthouse, Donovan joined his legal team and smiled for a group picture.

The Bakers were not available for comment. Before the verdict was read, the couple sat closely together, as they had throughout the 23-day trial.

Their lawyers portrayed Goldman's investment bankers as a "bottom of the barrel" team that failed to properly vet concerns about Lernout & Hauspie's claims of skyrocketing sales in Asia.

DEAL DOOMED BY BUYER'S FRAUD   Continued...

 
Traders work on the floor of the New York Stock Exchange near the Goldman Sachs stall July 16, 2010. REUTERS/Brendan McDermid