KPMG settles with L&H investors
Stumps up $115m
KPMG has agreed to pay $115m to settle lawsuits brought against it by investors in the now-bankrupt software firm Lernout & Hauspie.
The lawsuit claimed that Lernout & Hauspie and its top executives used deceptive accounting practices to artificially inflate the company's reported revenues by 64 per cent over a two-and-a-half-year period. The company filed for bankruptcy in 2000, in the middle of the scandal.
The company was a client of KPMG in Belgium, which in turn passed work along to the US operation.
Anyone who bought stock in the firm between 28 April, 1998, and 9 November 2000 is eligible for compensation. However, because of the sheer scale of the collapse, investors will likely get back mere pennies on each dollar invested.
Jeffrey Block, a partner at Berman DeValerio, one of three law firms acting for the investors, said: "Lernout & Hauspie used almost every accounting trick in the book to scam investors, which led to the company's demise."
He added that the recovery, which, if approved, will be the third largest of its kind, is a "win for investors, particularly considering the company went bankrupt".
Although the settlement marks the end of the case against KPMG, it is still pending against others, including former Lernout & Hauspie top executives. These same executives are currently facing criminal charges in Belgium.
The accounting firm's US and Belgian operations have not admitted any wrongdoing, maintaining that they were the victims of a "massive, complex, and cleverly conceived fraud at Lernout & Hauspie".
KMPG said the decision to settle was a practical business decision and "saves the firms from protracted legal battles beyond the four years already spent on this matter". ®
Meet the guinea pig man of Flanders
SEC takes belated fraud action against L&H
L&H struck dumb
L&H told where to stick its bankruptcy protection request
L&H subpoenaed by SEC
L&H returns fire as the class actions roll in
Sponsored: Benefits from the lessons learned in HPC