Goldman Sachs portrayed speech recognition pioneer Dragon Systems Inc. as rushing to close a $580m deal without sufficiently vetting its buyer in a doomed union that triggered a negligence suit and landed the bank in Boston federal court.
Bloomberg reports that beginning its defense this week, Goldman Sachs made its case to jurors who have spent weeks hearing how the 2000 all-stock deal was quickly followed by an accounting scandal that led to the collapse of suitor Lernout & Hauspie Speech Products NV.
Goldman, which advised Dragon on the deal, called witnesses to counter allegations by Dragon founders Jim and Janet Baker that its negligence cost them their life’s work.
Testifying January 9th for Goldman Sachs, former Dragon president John Shagoury agreed with a bank attorney that Dragon’s board of directors was focused on 'speed and certainty' in the months leading to the deal.
'Because the company’s financial situation was getting worse instead of better, and at the same time we felt it was creating a huge distraction for the employees, we needed to get something done, or decide how the company was going to continue', Shagoury testified.
'Do you blame Goldman Sachs that the stock options became worthless in the merger ?' Goldman Sachs attorney Paul Vizcarrondo asked.
'No', said Shagoury, who became president of Lernout & Hauspie Holdings USA when the deal closed, and is now president of health care communications technology company Eliza Corp.
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