Another year’s delay for victims of 20-year-old fraud case

Another year’s delay for victims of 20-year-old fraud case
Jo Lernout (right) enters his appeal hearing in 2007. © Belga

In the year 2000, reports brought to light irregularities in the bookkeeping of Lernout & Hauspie, a speech technology firm based in Ypres in West Flanders.

The company had been set up by two local men, Jo Lernout and Pol Hauspie, and their company was dealing with what was then cutting-edge technology: the speech recognition that would later make Siri and Alexa possible.

The company attracted attention in the US, from among other Bill Gates, and at one point had a market capitalisation of $10 billion. The local fame attracted the money of thousands of Flemish private investors, and the Flemish government jumped on board also, guaranteeing a bank loan made to the company.

Then the roof caved in. The Wall Street Journal revealed a whole array of financial and accounting irregularities, the company’s backers fled as regulators investigated, and L&H went bust in 2001.

When the irregularities led to fraud charges, Hauspie pled guilty, while Lernout denied everything, blaming a CIA conspiracy. At trial, the two name partners, together with former CEO Gaston Bastiaens and former vice-president Nico Willaert, were sentenced to five years in prison, with two years suspended.

That still left about 15,000 small investors looking for compensation for their losses resulting from the fraud. Deminor, an advisor to 10,000 of the duped investors, tried going after KPMG, the accountancy firm that had revised the L&H books. But that attempt was struck down by the court of appeal in Ghent, which had only come to the question in 2014, following a series of unsuccessful appeals of the original verdict to the Cassation Court.

Last December Deminor finally said it was abandoning its action on the basis that none of those involved had the means to pay compensation. Only the four men who went to prison and two others are liable, and none of them has anything like the money required to compensate the 8,000-9,000 victims still seeking damages.

This morning, the court of appeal in Ghent said it would take until 10 December 2021 at the earliest before it could give a ruling on damages.

Alan Hope

The Brussels Times

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