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How the Inventors of Dragon Speech Recognition Technology Lost Everything

samzenpus posted more than 2 years ago | from the all-the-eggs-in-one-basket dept.

The Courts 606

First time accepted submitter cjsm writes "James and Janet Baker were the inventors of Dragon Systems' speech recognition software, and after years of work, they created a multimillion dollar company. At the height of the tech boom, with investment offers rolling in, they turned to Goldman Sachs for financial advice. For a five million dollar fee, Goldman hooked them up with Lernout & Hauspie, the Belgium speech recognition company. After consultations with Goldman Sachs, the Bakers traded their company for $580 million in Lernout & Hauspie stock. But it turned out Lernout & Hauspie was involved in cooking their books and went bankrupt. Dragon was sold in a bankruptcy auction to Scansoft, and the Bakers lost everything. Goldman and Sachs itself had decided against investing in Lernout & Hauspie two years previous to this because they were lying about their Asian sales. The Bakers are suing for one billion dollars."

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FP (-1)

Anonymous Coward | more than 2 years ago | (#40657615)

FP Bitches!

Bummer..... (-1)

Anonymous Coward | more than 2 years ago | (#40657617)

Hate it when that happens....

One word (-1)

Anonymous Coward | more than 2 years ago | (#40657619)

WOW

Ironic (5, Funny)

Anonymous Coward | more than 2 years ago | (#40657621)

I thought Goldman Sachs were the good guys?

Re:Ironic (5, Informative)

fizzer06 (1500649) | more than 2 years ago | (#40657689)

They are NOT.

They are the good guys (2, Funny)

Anonymous Coward | more than 2 years ago | (#40657701)

IN BIZARRO WORLD

Re:They are the good guys (5, Interesting)

alphatel (1450715) | more than 2 years ago | (#40657765)

IN BIZARRO WORLD

Mr. Berzofsky ... was asked one more time — the fact that the Bakers and Dragon’s shareholders lost everything doesn’t affect your opinion?
“Correct,” Mr. Berzofsky responded. “We guided them to a completed transaction.”

Bizarro World in full force

Re:They are the good guys (5, Interesting)

Anonymous Coward | more than 2 years ago | (#40658019)

There's an "Ethical Wall" between the consulting and investing arms. You'll hear complaining on every transaction, 50% of the time it's too high, 50% of the time it's too low. The consultants shouldn't know what the investors are trading on, and the traders shouldn't know what the consultants are advising on. As bad as it looks, this is how this should have happened, from GS's perspective.

Re:Ironic (5, Insightful)

griffo (220478) | more than 2 years ago | (#40657743)

No, they are actually te baddest of te bad. Responsible for Euro crisis, credit crisis, mortgage crisis et al. Too smart and too greedy. It's high time Goldman Sachs and former associates are made to PAY BACK what they STOLE!

Re:Ironic (3, Funny)

Anonymous Coward | more than 2 years ago | (#40657865)

but but but ... Goldman's CEO Blankfein said they're doing God's work in there, they MUST be good guys!

... for some definitions of 'God' and 'good guys', anyway

Re:Ironic (0)

Anonymous Coward | more than 2 years ago | (#40657955)

The Goldman god is the golden calf gone adult...

Re:Ironic (4, Insightful)

cpu6502 (1960974) | more than 2 years ago | (#40657985)

They should have been left to die, rather than bailed-out. (i.e. Vote no on TARP rather than help GS.)

Trading is not stealing (4, Insightful)

F69631 (2421974) | more than 2 years ago | (#40658039)

I lean left on local standards (those of European social democracy) so I'd probably be something like "extreme left" on American standards (if we consider Democrats a left-wing party). I have no love for either Goldman Sachs or the whole sector they operate in... that said, you can hardly call what they did "stealing".

Are they unethical? Sure. Have they broken some laws by deceiving regulators? Probably. Misleading advertising? Might be. Fraud? Depends on the contracts they've used... but stealing? No. They've simply not cared about the fate of their clients - or the society - except where they had the economic incentive to do so. That kind of stuff happens when you have free markets.

For any given amount of freedom in the markets, you get some good and some bad sides. You thus choose a level where the good sides outweigh the bad ones... and acknowledge that the decision also leads to some undesired results. What doesn't work is choosing one level, at first ignoring undesired results and then, when they become too apparent, call them stealing, etc. without making an argument for choosing another level of freedom in general.

Re:Trading is not stealing (4, Informative)

cpu6502 (1960974) | more than 2 years ago | (#40658125)

They stole money from the taxpayer's treasury. To the tune of $100 per U.S. home.

Re:Ironic (5, Funny)

jo42 (227475) | more than 2 years ago | (#40657759)

Since when has Wall Street (Goldman Sachs, Lehman Brothers, AIG, et al) done anything other than for themselves?

They take the little guys money and bend them over (without a tube of Vaseline).

Re:Ironic (0)

Anonymous Coward | more than 2 years ago | (#40657875)

Until Goldman Sachs actually spends a night in jail... why yes, he IS a good guy!

Re:Ironic (1)

Vecanti (2384840) | more than 2 years ago | (#40657973)

Spend a night in jail? For DIRECTLY ruining peoples lives and costing them BILLIONS of dollars?

No, no... We need that space for the tweens filling their iPods with Katy Perry tunes from the evil PIRATE BAY!!

Re:Ironic (5, Informative)

Bob9113 (14996) | more than 2 years ago | (#40657887)

I thought Goldman Sachs were the good guys?

They are! That's why the Hope & Change President decided to put change on hold and continue the long-standing tradition of stuffing the White House with Goldman alums and associates [firedoglake.com] and sending administration people back [huffingtonpost.com] .

Re:Ironic (-1, Troll)

the eric conspiracy (20178) | more than 2 years ago | (#40658115)

Gotta love that firedoglake citation. One of the most wacko sites on the internet, not an easy accomplishment.

Re:Ironic (2)

Tough Love (215404) | more than 2 years ago | (#40657941)

I thought Goldman Sachs were the good guys?

Since when? Goldman Sachs has always been a nest of vipers. Watch the videos of Lloyd Blankfein lying through his teeth [guardian.co.uk] .

And while you're at it, note how Warran "Wise Grandfather" Buffet always closes ranks with these crooks.

Re:Ironic (1)

Yvanhoe (564877) | more than 2 years ago | (#40658029)

Of course they are. Otherwise, the head of the European Central Bank would not be the former director of Goldman Sachs for the section that lend money to the European country, during the period when Greece cooked their books.

This move is colloquially known as "naming Bin Laden head of the CIA."

One! (4, Funny)

50000BTU_barbecue (588132) | more than 2 years ago | (#40657627)

billions! It's so much money even the singular takes an "s"!

Re:One! (5, Insightful)

Samantha Wright (1324923) | more than 2 years ago | (#40658001)

But strangely—probably the first time I've ever seen a lawsuit in the news with a huge amount of money involved and was able to say "I understand exactly how they arrived at that amount, given the circumstances, and in no way do I find it unreasonable or astronomical."

Re:One! (1)

Anonymous Coward | more than 2 years ago | (#40658035)

So, funny story time. I free associate thinking I'll read http://en.wikipedia.org/wiki/Dragon [wikipedia.org] and there I find a link to http://en.wikipedia.org/wiki/Behemoth [wikipedia.org] where there is this: http://en.wikipedia.org/wiki/Behemoth#Plural_as_singular [wikipedia.org]

Which leads to this: http://en.wikipedia.org/wiki/Pluralis_excellentiae [wikipedia.org]

So IOW yes and your head explodes and I take a bow. (Bonus: CAPTCHA is "retraces".)

Why civil? (2)

DoofusOfDeath (636671) | more than 2 years ago | (#40657631)

Did Goldman Sachs employees engage in some kind of fraud?

I would give my two left lugnuts to see white-collar crime like this vigorously prosecuted.

Re:Why civil? (1)

alen (225700) | more than 2 years ago | (#40657679)

Yes, out of the tens of thousands of emoyees everyone is supposed to know what everyone is doing

And a few there found that l&h was a fraud before it blew up

Re:Why civil? (4, Interesting)

DoofusOfDeath (636671) | more than 2 years ago | (#40657737)

Yes, out of the tens of thousands of emoyees everyone is supposed to know what everyone is doing

And a few there found that l&h was a fraud before it blew up

If corporations are people, then they're responsible for the relationships between the different thoughts in their heads.

Re:Why civil? (4, Funny)

Farmer Tim (530755) | more than 2 years ago | (#40657797)

If corporations are people, then they're responsible for the relationships between the different thoughts in their heads.

Couldn't they claim diminished responsibility due to multiple personality disorder?

Re:Why civil? (2)

Grave (8234) | more than 2 years ago | (#40658047)

Ahh, you should file a patent on that - the corporate insanity defense. It can get a company out of all sorts of legal troubles!

Re:Why civil? (4, Insightful)

Smallpond (221300) | more than 2 years ago | (#40657837)

Yes, out of the tens of thousands of emoyees everyone is supposed to know what everyone is doing

And a few there found that l&h was a fraud before it blew up

If corporations are people, then they're responsible for the relationships between the different thoughts in their heads.

When a corporation makes a huge profit, the top execs are always willing to accept reponsibilty and accept an obscene bonus. When the corporation does something bad, shouldn't they be responsible for that, too?

Re:Why civil? (3, Interesting)

gznork26 (1195943) | more than 2 years ago | (#40658025)

Sure. Go ahead. Make corporations 100% people. Give them all of the rights they've been lusting after, and once they've grabbed that carrot, shut the door behind them and give them the responsibilities and the punishments as well. I fantasize about this sort of thing on my blog. This one launched a series: http://klurgsheld.wordpress.com/2007/08/30/short-story-logical-conclusion/ [wordpress.com]

Re:Why civil? (0)

Anonymous Coward | more than 2 years ago | (#40658015)

The "Romney said, 'Corporations are people', so we must take this statement literally and extrapolate wildly" meme has got to stop. If you understand the context of when Romney was speaking, he was saying the corporations are made of people, and the benefits of the corporation go to people, not to abstract entities. When SCOTUS held in Citizens United that corporations are people, the holding was that corporations are formed by people, and that people have the right to join together in a corporation so that they can speak together. I don't agree with either of these statements, but I don't think either former Gov. Romney or SCOTUS ever meant that corporations should be treated like biological entities.

Re:Why civil? (1)

Toonol (1057698) | more than 2 years ago | (#40658137)

The people that want to use that statement to criticize Romney will ignore your explanation, and continue using the out-of-context quote to attack. They don't _care_ if it's true, just whether it's effective.

Re:Why civil? (5, Informative)

jhoegl (638955) | more than 2 years ago | (#40657751)

I think the icing on the cake is the fee of 5 mil to point them to a known fraudster.
Talk about the ultimate troll move. That surpasses being Rick Rolled.

Re:Why civil? (2)

DoofusOfDeath (636671) | more than 2 years ago | (#40657829)

I think the icing on the cake is the fee of 5 mil to point them to a known fraudster.

Talk about the ultimate troll move. That surpasses being Rick Rolled.

I just figured out what their eternity in Hell is going to look like...

Re:Why civil? (5, Insightful)

Jackie_Chan_Fan (730745) | more than 2 years ago | (#40657889)

There is no hell.

The only way to torture these criminals is while they're alive. Get to it.

Re:Why civil? (4, Insightful)

blind biker (1066130) | more than 2 years ago | (#40657971)

There is no hell.

The only way to torture these criminals is while they're alive. Get to it.

Indeed. The whole idea of "heaven" and "hell" was invented by the dominant classes, to keep the little guys at bay: "yeah, we're kinda rich now, and your life sucks monkeyballs, but one day ye shall inherit the earth, the eternal life in heaven awaits you, while we are at grave risk of going to hell".

Re:Why civil? (0)

Anonymous Coward | more than 2 years ago | (#40657761)

While it is certainly conceivable that not every employee there should or even could know what decisions every other employee has taken, it's in no way putting anyone out to ask them to WRITE $#!% DOWN WHEN THEY DO $#!%.

Perhaps even have a LIST of companies that they KNOW ARE ENGAGING IN MASSIVE FRAUD, and require their employees to check it over before making any sort of recommendation? Otherwise, yes. You ARE liable for professional malpractice, if not outright solicitation to defrauding.

Re:Why civil? (0)

Anonymous Coward | more than 2 years ago | (#40657785)

Out of the tens of thousands of employees, everyone WHO IS DEALING WITH CLIENT X is supposed to know WHEN SOMEONE ELSE DECIDES COMPANY X LOOKS LIKE A GIGANTIC FRAUD.

FTFY - in shouty caps and everything.

Re:Why civil? (5, Interesting)

Anonymous Coward | more than 2 years ago | (#40657851)

Yes, when a company agrees to take a large fee to advise on an M&A advisory, it's completely unreasonable to expect the people they put on the deal to do such challenging things like due diligence, which might include asking around if anyone knows about this company, or doing any research on their own.

Or if, as is apparently their stated position in this lawsuit, they believe that doing due diligence isn't part of their job, pointing out to their client that no due diligence has been done, and calling that a risk to the long-term value of the deal is apparently ALSO not their jobs.

Look - high finance is hard. People routinely make lots of bets with lots of money. Sometimes those bets go badly. And having good advisors isn't a magic bullet for avoiding a bad bet - sometimes the best info you have at the time is wrong, and only with the benefit of hindsight might you realize something might not turn out.

But there's a difference between "The best info we had was wrong" and "We didn't really bother getting any info." And also between "We advised you that we weren't going to research this, and you agreed to take on that risk" and "we gave you reason to believe we'd done enough homework that you should feel confident, even though we hadn't."

Re:Why civil? (4, Insightful)

spire3661 (1038968) | more than 2 years ago | (#40658083)

High finance is NOT hard. They purposefully obfuscate everything.

Re:Why civil? (1)

geoskd (321194) | more than 2 years ago | (#40658057)

Yes, out of the tens of thousands of employees everyone is supposed to know what everyone is doing

No, but each person from the top down should know at least the broad strokes and important details of the deals their subordinates are working on. If you want to fix wall street, eliminate limited liability. If shareholders can loose everything from a bad investment, they will be a lot more careful about who they invest in, and keep their appointed trustees on a very short leash. Lets start using the capitalist system the way it was meant to be used...

If I give the keys to my gun cabinet to a psychopath, then the law will hold me at least partly responsible for the results, but if an investor gives money to a sociopath who pollutes enough to cause multiple deaths, the investor is indemnified by limited liability. Stupid, just stupid: Damn lawyers

-=Geoskd

Re:Why civil? (4, Insightful)

shine (1502) | more than 2 years ago | (#40657687)

Fraud is GS middle name. They will bet for you and bet against you out of both sides of their wallet.

Re:Why civil? (1)

spire3661 (1038968) | more than 2 years ago | (#40658087)

So basically they are the Duke Brothers real world equivalent.

Re:Why civil? (3, Interesting)

Anonymous Coward | more than 2 years ago | (#40657763)

Maybe and maybe not. A more interesting question would seem to be were they negligent. If I pay someone $5m for investment advice and an introduction to a reputable financial institution I would assume that part of the reasoning is to mitigate the risk of selecting investment partners without being able to perform the due diligence yourself. If GS instead takes my $5m and then introduces me to a fraudulent company then I haven't off loaded my risk at all and it would seem to be the equivalent of consulting malpractice or negligence. I'm not sure fraud is the right term but they definitely didn't uphold their contract.

Re:Why civil? (1)

Anonymous Coward | more than 2 years ago | (#40658065)

Welcome to the world of finance. . Like all gambling operations, stock trading is tied to large amounts of money being bet by small investors to reap rewards that are controlled by larger investors. It gets criminal when "the house" rigs the odds, and Goldman Sachs has been caught repeatedly cooking the books and reaping their profits from the resulting trades for years. They were up to their armpits in the subprime mortgage craziness, and there's no reason to assume they were any more honest in dealing with technology clients such as Dragon.

If you think I'm kidding, check out http://www.nytimes.com/interactive/2011/04/14/business/14crisis-docviewer.html, a copy of the Senate report on the housing market collapse.

Re:Why civil? (3, Insightful)

purpledinoz (573045) | more than 2 years ago | (#40657767)

All big banks are engaged in fraud. Google "LIBOR scandal".

Re:Why civil? (1)

gl4ss (559668) | more than 2 years ago | (#40657821)

well, if the technology ended up from the bankruptcy sale to someone goldman benefitted from... then that would be ultra violence fraud.

but I suppose the fraud is just that goldman&sachs fixed up two companies they possibly knew were cooking books together(and presumably profited from that transaction as well while full well knowing it wouldn't end well)

Re:Why civil? (3, Interesting)

ShanghaiBill (739463) | more than 2 years ago | (#40657847)

Did Goldman Sachs employees engage in some kind of fraud?

It is possible that they did. It all depends on what the contract says. If, in addition to finding a buyer, they also promised to do due diligence [wikipedia.org] , and they gave a different conclusion from the one reached internally, then that could be considered fraud. Since GS was paid $5M, they certainly had the resources to be thorough, so "we forgot about that" probably won't be considered a valid excuse.

Re:Why civil? (3, Funny)

ynp7 (1786468) | more than 2 years ago | (#40657899)

Isn't the burden of having all that money and the guilt over how it was acquired really punishment enough?

Re:Why civil? (1)

Tough Love (215404) | more than 2 years ago | (#40658003)

Did Goldman Sachs employees engage in some kind of fraud?

Did they ever not engage in some kind of fraud?

Add (0)

Anonymous Coward | more than 2 years ago | (#40657659)

Does it mean they'll finally stop their freaking 5 minutes long add?

Two lessons here (5, Insightful)

Anonymous Coward | more than 2 years ago | (#40657667)

Lesson 1: Just because you paid someone 5 million dollars doesn't mean they have your best interests at heart.
Lesson 2: If a deal involves putting all your eggs in one basket, you should assume that the basket is faulty, and that everyone knows it but you.

Re:Two lessons here (1)

couchslug (175151) | more than 2 years ago | (#40657777)

Mod Parent Up for Extreme Truthiness!

Re:Two lessons here (-1, Troll)

K. S. Kyosuke (729550) | more than 2 years ago | (#40657859)

"Truthiness"? What's that supposed to mean? Did you just pull that word out of your assiness?

Re:Two lessons here (-1)

Anonymous Coward | more than 2 years ago | (#40657895)

Look it up. [wikipedia.org] Crawl out from under the fucking rock you've lived under and expose yourself to a bit of popular culture.

Re:Two lessons here (-1, Flamebait)

K. S. Kyosuke (729550) | more than 2 years ago | (#40657999)

I *do* know the word. But we're not in a satirical TV show here, we're in a rational discussion. Oh wait...I seem to have my expectations of you set overly high.

Re:Two lessons here (0)

Anonymous Coward | more than 2 years ago | (#40657915)

Truthiness [wikipedia.org]

Re:Two lessons here (1)

Anonymous Coward | more than 2 years ago | (#40657925)

"Truthiness"? What's that supposed to mean? Did you just pull that word out of your assiness?

No, he pulled it out of Stephen Colbert's assiness [wikipedia.org] .

Re:Two lessons here (4, Insightful)

girlintraining (1395911) | more than 2 years ago | (#40657835)

Lesson 2: If a deal involves putting all your eggs in one basket, you should assume that the basket is faulty, and that everyone knows it but you.

Lesson 3: If you're a first time entrepreneur, and you've managed to become successful and now want to maintain that by going to reputable industry leaders for advice and support, you're gonna get raped. They don't want more successful people; it cuts into the profit margin of those who already are.

Re:Two lessons here (0)

Anonymous Coward | more than 2 years ago | (#40657843)

Lesson 2: If a deal involves putting all your eggs in one basket, you should assume that the basket is faulty, and that everyone knows it but you.

But it worked out for Nokia! ...oh wait

Re:Two lessons here (3, Insightful)

gr8_phk (621180) | more than 2 years ago | (#40657891)

Lesson 4: Cash is king. That paper shit they pass around on wall street has nebulous value. If someone wants to give you millions of dollars for your company, let them give you millions of actual dollars.

OTOH, from the short summary it sounds like they may have a case.

Re:Two lessons here (3, Interesting)

cpu6502 (1960974) | more than 2 years ago | (#40658061)

>>> That paper shit they pass around on wall street has nebulous value. If someone wants to give you millions of dollars for your company, let them give you millions of actual dollars.

Irony.
Dollars are paper too. In fact the paper dollar has lost 97% of its value since the creation of the Federal Reserve in 1913... most of it just since 1972. Contrast that with the 1800s when the paper dollar lost just 2% of its value (because it was tied to gold & silver... real goods that can't be run off a printing press.)

Goldman Sachs (0)

Anonymous Coward | more than 2 years ago | (#40657669)

So Goldman Sachs made millions and everybody else got the shaft. Isn't that how it's supposed to work?

Or at least that's the impression I've gained reading the news since forever.

Jury (-1)

Anonymous Coward | more than 2 years ago | (#40657693)

I hope the jury is smart enough to realize that taxpayers will be footing the bill on this one (since banks are "too big to fail") and adjust the damages accordingly.

Power to them (5, Insightful)

B33RM17 (1243330) | more than 2 years ago | (#40657699)

More power to them. I don't know much in the area of finance and the like, but stories like this continue to give me the impression large financial institutions like to play fast and loose with other people's (read: little guy's) money. Too big to fail? More like too big to be allowed continued operation.

Re:Power to them (2)

Tough Love (215404) | more than 2 years ago | (#40658021)

Goldman Sachs is well known for selling investment vehicles that they themselves would not touch with a ten foot pole because of their inside knowledge.

Crooks (2, Funny)

Anonymous Coward | more than 2 years ago | (#40657717)

Imagine that, Goldman Sachs involved in swindling people.

Will wonders never cease.

*everything* ? (-1)

Anonymous Coward | more than 2 years ago | (#40657739)

Everything? I take it they are homeless now? If not, there's no reason to shed tears for them. They'll just have to get a job like most of us. And if they didn't put any money aside, that's too freaking bad for them.

I like money (0)

Anonymous Coward | more than 2 years ago | (#40657741)

How many billions?

One can only hope they win but... (2)

divisionbyzero (300681) | more than 2 years ago | (#40657747)

inevitably Goldman will weasel its way out of it.

Re:One can only hope they win but... (2)

rudy_wayne (414635) | more than 2 years ago | (#40657969)

From TFA:

But on Feb. 29, Dragon received an odd memo from Goldman. It wasn’t addressed to anyone in particular at Dragon, and it wasn’t signed by anyone at Goldman. The Goldman employees testified later that they had no idea who had sent it. But the memo referred to many of the same due diligence issues that Ms. Chamberlain raised. The memo asserted, however, that Dragon’s accounting firm, Arthur Andersen, should do the work, not Goldman.

Well then what the fuck was Goldman getting paid $5 Million for?

And one of the defenses now being used by Goldman is that letter. Goldman is now claiming they are not liable for anything because they told Dragon it was their accountants responsibility to perform due diligence.

Standard GS MO (0)

Anonymous Coward | more than 2 years ago | (#40657769)

Sell toxic crap (mortgage backed securities) to one organization whilst shorting the same toxic crap.

But it's all OK as the boss Llloyd Blankfein is just a banker doing God's work.

ROAR ROAR ROAR (-1)

Anonymous Coward | more than 2 years ago | (#40657775)

I didn't know dragons could talk.

DOVAHKIN!!!! (0)

Anonymous Coward | more than 2 years ago | (#40657879)

NOT A SINGLE SARDINE!

Sad (5, Insightful)

Deepmist (2684833) | more than 2 years ago | (#40657787)

I read this story when it was published, the the guy that owned the company and lost his technology on top of all that money had a phd and was making huge advancements in the technology much faster than predicted, he's probably the reason Siri can exist. The saddest part is that he still had many improvements he was working on and now he just can't, the tech has been sold, he can't touch it anymore without getting sued. In the end humanity loses.

Re:Sad (1)

decadentdepraved (2684831) | more than 2 years ago | (#40657881)

I know for a fact that their stuff is running inside of Siri -- because a hugely lucrative thing, and got snapped up for pennies. They sold out too soon, regardless of the terms.

Re:Sad (4, Insightful)

geoskd (321194) | more than 2 years ago | (#40658109)

I know for a fact that their stuff is running inside of Siri -- because a hugely lucrative thing, and got snapped up for pennies. They sold out too soon, regardless of the terms.

Actually, they sold at just about the right time, Half a bil is not an untidy sum for the product they had at the time. They just got swindled by GS. plain and simple. GS should never have set them up to do business with a company that GS themselves had refused to do business two years prior. GS was paid to do the due diligence, as that is their field of expertise. Their failure to do the research and / or to present it to Dragon is why they are being sued, and why they should have to cough up the money. Specifically, I think they should take it out of the bonus' of every executive who worked at GS at that time, as a percentage of the whole. Make those bastards sell one of their yachts.

-=Geoskd

Re:Sad (5, Interesting)

kolbe (320366) | more than 2 years ago | (#40657961)

Back in 1997-99, my colocation space at Level 3 was right next to Dragon Systems' cabinets. As such, I was able to chat with their IT team on several occasions and met the Bakers on at least one occurrence where we discussed the futures of digital speech recognition (Dragon 2000 was being developed for Win2k at the time). Their insights and knowledge of speech recognition were unmatched by anyone else in the industry, not even IBM (who was working on it at the time too) was as advanced and I have no doubt that we would not have Siri or other similar technologies today if not for the Baker's research from in and out of Carnegie Mellon University.

The Baker bunch are not stupid people, they made a remarkable company last for almost 30 years, but it is obvious that they made a big mistake by putting everything in one "basket" as others here have stated. While I wish them luck, white collar crimes such as these are rarely won.

Typical... (1)

Anonymous Coward | more than 2 years ago | (#40657811)

The first TFA I've decided to read in months and it's behind a paywall. That'll teach me.

I don't get it (5, Interesting)

decadentdepraved (2684831) | more than 2 years ago | (#40657819)

I don't like GS (have had multiple experiences). But I'm still skeptical. Something seems off here. Given lack of good counsel, why did the Bakers go out on a limb, change course, and agree to an all-stock sale at the last minute? Why not walk away, or hire better advisors to get you what you need, and challenge GS fees in parallel? $580 mil was at stake. $5 mil is 1% of the pie. Seems like the only reason to sell is to get liquid. Why go to all that trouble just to swap shares of one stock for even higher risk and reward?

What I wondered is.. (4, Interesting)

biodata (1981610) | more than 2 years ago | (#40657823)

Who owns Scansoft, who apart from GS are the other big winners from this transaction? They got the world's best speech rec software for a fraction of its true value - I wonder who they were advised by?

Re:What I wondered is.. (0)

Anonymous Coward | more than 2 years ago | (#40657937)

If what you're hinting at is true I would suggest the damages be punitive and even larger than what they're seeking.

Wellllllll (4, Funny)

Anonymous Coward | more than 2 years ago | (#40657839)

"After consultations with Goldman Sachs,..."

That's your problem right there.

At least.... (0)

Anonymous Coward | more than 2 years ago | (#40657869)

....we have the comfort of knowing Goldman Sachs is still less evil than Electronic Arts.

Re:At least.... (4, Insightful)

geoskd (321194) | more than 2 years ago | (#40658147)

....we have the comfort of knowing Goldman Sachs is still less evil than Electronic Arts.

You're dead wrong, EA only really screws its employees, goldman sachs will screw anyone who gets close enough, which unfortunately happens to include everyone with a stake in the world economy. Every unemployed person on earth currently owes a partial debt of gratitude for their state of employment to goldman sachs.

-=Geoskd

I'm posting from my smart phone (2)

circletimessquare (444983) | more than 2 years ago | (#40657905)

And using the dictation option. But I can't create a post because every time I say g---m-- s----, all I see are a bunch of expletives in the comment box

Why are they still in business? (1)

ilsaloving (1534307) | more than 2 years ago | (#40657907)

Considering that this is far from the first blatantly fraudulent transaction that GS has performed, why has the gov't not clamped down hard on them?

Oh wait, NM. Forgot about the campaign contributions.

I stopped reading at "Goldman Sachs" (0)

Anonymous Coward | more than 2 years ago | (#40657921)

Subject says it all.

Serves Them Right (0)

loom_weaver (527816) | more than 2 years ago | (#40657997)

No love for Goldman Sachs here but if the inventors did what this article says (trading their entire company for the stock of a mysterious L&H company) then it sounds like they got greedy.

I hope they win (1)

detain (687995) | more than 2 years ago | (#40658023)

I hope they win. Investment companies can be the scum of the earth and rarely have your actual interests in mind.

I was working for an L&H competitor at the tim (4, Insightful)

rogerz (78608) | more than 2 years ago | (#40658045)

... and everyone in the industry knew that they were full of shit with their finances. The two founders - Lernout and Hauspie - were accountants, not technologists. The company had significant investment from the Belgian government, and L&H were politically well-connected enough to keep milking that funding source as they rode the tech frenzy of the 90's. In every instance where we competed against them, they always bid at ridiculously low prices that couldn't possibly be economically sensible. They had some decent technology, but their business practices were always suspect. It was very likely the taxpayer financing which kept their bubble from bursting before it did.

To be fair, Dragon was primarily involved in desktop ASR, whereas L&H (and my company - Voice Control Systems), were focusing on telephony applications. So, the Bakers may not have been fully acquainted with L&H's reputation. But, really, they should have been extremely suspicious of this deal, especially when the offer was changed to 100% stock. TFA didn't say what the value of some of the competing offers were, but I'm guessing they were substantially less than $580M. If it sounds too good to be true ....

None of this is to excuse Goldman, which apparently was hired to do something that they did not do. And clearly, the Bakers were done an injustice. But, something tells me that they were willfully blind to the possibility that this offer was unjustified. And for that, they should blame themselves.

always ask for some cash in a big deal (1)

peter303 (12292) | more than 2 years ago | (#40658053)

10% of the deal or $10M, whichever is lower

Now they are building a fraud recognition system. (1)

140Mandak262Jamuna (970587) | more than 2 years ago | (#40658055)

Enough with the speech recognition system. With their extensive experience with Goldman Sachs they are building a fraud recognition system. But alas, it is not going to make them much money. Their system is basically,

bool RecognizeFraud(){
if ( GetCounterPartyName() == "Goldman Sachs") then
return true;
}else{
return false;
}
}

Really (0)

Anonymous Coward | more than 2 years ago | (#40658059)

Goldman sucks.

L&H at fault, not GS (1, Interesting)

tukang (1209392) | more than 2 years ago | (#40658071)

I RTFA and while it says that another division of Goldman Sachs was skeptical about L&H, there is no evidence that the 4 guys who handled the account had any knowledge of it or communicated with that division. Nor is there any evidence that they had any motive to sell Dragon Speech to L&H when they had a lot of other credible suitors like Ford & Sony. Was Goldman Sachs sloppy? I'd say yes. But the real fraud was committed by L&H and as much as I don't like Goldman Sachs, it's not their fault that the folks at L&H were con men.

Re:L&H at fault, not GS (0)

Anonymous Coward | more than 2 years ago | (#40658141)

I wouldn't be surprised if it turned out that GS was helping L&H to cook their books.

Microsoft Agent (1)

Pop69 (700500) | more than 2 years ago | (#40658153)

Anybody remember MS agent and it's associated speech recognition software?

Wasnt that all designed to use the lernaut and hauspie speech engine ?
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