Tuesday, May 22, 2007

Speech technology company in court (1)

Yesterday the court case about the speech technology firm Lernout and Hauspie (L&H) started in Ghent (Belgium). At last; after six years of preparation. It is a mega process about fraudulent bookkeeping. Some 21 persons have been indicted as well as the accountant company KPMG and the bank Dexia. No less than 90 lawyers are representing their clients. The court has left the court house and has started the proceedings in an exhibition centre. The court case catches a lot of attention as more than 13.000 shareholders lost money. They can not request compensation as this court case is one of criminal proceedings and is not a civil case.

L&H started in 1987 in the Belgian technology hotspot Ieper. It grows in no time to a company worth 10 billion euro. In 1998 Bill Gates visited the company which saw it as its mission to make language the interface to man-machine manipulation. By 2001 everything was over and the company had gone bankrupt. The Wall Street Journal had started a series of articles one year earlier, claiming that the figures had been pumped up; especially in South Korea where more than 40 percent of the revenues were picked up. According to prosecution managers of L&H received money from the banks and used this in order to establish Language Development Centers, which ‘bought’ licenses to the speech software. Eventually the prosecuters claim that L&H pumped up the figures for 166 million euro.

It is a case of national pride, technology hype and conspiracy. Belgians were proud of their innovators; the royal house regularly received the founders of the company at their palace. Speech technology with translation software as well as speech-to-text software was sexy. But there was also suspicion about secret services and industrial spy activities. The US CIA was said to be after the company as it had technology the CIA did not have. The European secret service network Echelon helped the company to go into bankruptcy.

The culmination of problems came in the years of the internet hype. Everything was possible technically and money wise. But growing fast harbours risks, especially personnel risks. The managers Jo Lernout and Pol Hauspie do not check closely the credentials of people that offer their services. In this case, when people said that they had been a manager in the Dutch consumer company Philips they were accepted with eagerness; in this case we see back Gaston Bastiaens, the manager of the Philips CD-i technology and publishing venture, which was called off in 1996. When people said that they made big deals with Philips, they were believed; it is said that Maurits de Prins, who swindled Philips with the video chain Super Club, was involved in financing L&H through a Dutch straw man. Also the one year vice CEO of Philips, Roel Pieper was one of the crises managers of the company for a short time; he has not been indicted.

The total proceedings will take half a year. I will keep you updated.

Blog Posting Number: 761


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