Goldman Sachs has defeated a $580m negligence suit over its role as adviser to speech- recognition pioneer Dragon Systems Inc. in a doomed merger, one of its biggest victories in a string of claims by dissatisfied clients since the financial crisis.
Bloomberg reports that a federal jury in Boston Wednesday rejected the claims of Dragon’s founders Jim and Janet Baker and two other shareholders that Goldman Sachs failed to properly vet Belgium-based Lernout & Hauspie Speech Products NV. The all-stock deal in June 2000 was rendered worthless months later when the fraud at Lernout & Hauspie was exposed and the company filed for bankruptcy.
The verdict relieves Goldman Sachs of responsibility for a sale that left its clients with worthless shares in a failed company. The four Dragon founders sold some Lernout & Hauspie shares for $11m before the stock collapsed and the Bakers lost the technology they spent decades developing.
'This was the most important business decision of our lives', Janet Baker had said in an interview in May in the couple’s home in West Newton, Massachusetts. 'We chose Goldman because of their global reach and their reputation as the world’s most important investment bank'.
As she left the courthouse yesterday, Janet Baker said 'we’re disappointed. I’d like to know what the jury saw that we didn’t'. Several members of the jury declined to comment as they left the courthouse.
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