UPDATE 1-Goldman found not negligent in arranging doomed Dragon sale
Jan 23 (Reuters) - A federal jury on Wednesday gave Goldman Sachs Group Inc 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.
Goldman was accused of negligence, intentional misrepresentation and breach of fiduciary duty, but the jury cleared the investment bank of all of the claims brought 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.
But lawyers for Goldman said it wasn't the investment bank's job to sniff out the accounting fraud that ultimately doomed Lernout & Hauspie and made the remaining stock held by the Bakers worthless. The Bakers owned 51 percent of the company but only were able to sell a few million dollars worth of L&H stock before the collapse.
In counter claims brought by Goldman, the jury found that Janet Baker had made negligent misrepresentations to Paul Bamberg and Robert Roth, Dragon employees who held 5.54 percent and 2.75 percent, respectively, of the company's stock.
The jury also said Goldman proved that Janet Baker breached her fiduciary duty to Bamberg and Roth. The jury said Jim Baker breached his fiduciary duty to Bamberg, but not to Roth, according to the verdict.