Goldman Sachs' missteps advising speech-recognition pioneer Dragon Systems Inc. in a merger weren’t egregious enough for the bank to be found in violation of a Massachusetts law, a federal judge ruled.
Bloomberg News reports that U.S. District Judge Patti B. Saris in Boston, citing a jury verdict in January that rejected a $580m negligence suit against Goldman Sachs filed by Dragon founders Jim and Janet Baker and two other shareholders, denied the plaintiffs’ request for claims under a state law.
The judge called the investment banking team assigned to the all-stock sale of Dragon to a Belgium competitor in 2000 'professionally negligent' because it didn’t fully vet buyer Lernout & Hauspie Speech Products NV, which collapsed in an accounting fraud rendering the deal worthless.
'The reasons why small startup companies like Dragon go to a place like Goldman to assist with hatching their golden eggs is because they don’t have their own expertise to analyze revenue projects by asking tough questions to potential merger partners', the judge said.
'Still, I give weight to the fact that the jury found for the defendant on this claim and there was sufficient evidence to support that finding even if I conclude otherwise', Saris said in her ruling.
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