It was an American success story gone horribly wrong.
A married couple started a software business in their Massachusetts home and eventually sold it to a Belgian company for $580 million. Just a few months after the sale, the Belgian company, which paid for the purchase with its stock, collapsed in an accounting fraud, wiping out the couple's newly minted fortune.
And like so many American success stories gone wrong, this one ended up in court. The couple, James and Janet Baker, sued the investment bank that represented them in the sale — Goldman Sachs — contending that the bank had failed to uncover that their acquirer, Lernout & Hauspie, was a fraud.
Goldman battled back, arguing that detecting fraud was not its job. And late Wednesday, in a resounding victory for the bank, a jury rejected all of the Bakers' legal claims.
"When you hire a banker, you ask it to do certain things, but delving into the books, doing accounting and finding fraud, is not one of them," John D. Donovan, one of Goldman's lawyers, said during the monthlong trial, which was heard in Federal District Court in Boston.
The case brought by the Bakers was among a spate of legal problems and public relations headaches that have been distractions for Goldman in recent years. A former Goldman director was convicted of leaking boardroom secrets to a hedge fund manager last spring.
A Goldman vice president publicly quit with an opinion article in The New York Times, "Why I Am Leaving Goldman Sachs," that criticized the bank's business practices. In 2010, Goldman paid $550 million to settle civil accusations that it had defrauded investors in the sale of subprime mortgage securities.
Goldman and other large banks typically settle lawsuits rather than engage in costly and protracted litigation. But several attempts to mediate the dispute with the Bakers failed, and Goldman dug in for a fight. The bank took the case to trial, despite the real risk that a jury of ordinary citizens might be predisposed to punishing a Wall Street bank in the post-financial-crisis era.
"We believed we were right on the facts, and while you can never predict what a jury will decide, we were confident that with a fair hearing we had a substantial chance of prevailing," said Paul Vizcarrondo of Wachtell, Lipton, Rosen & Katz, a member of Goldman's trial team.