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Tech Firm Founders Reject Report

April 26, 2001

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BRUSSELS, Belgium (AP) _ Former senior managers of Lernout & Hauspie Speech Products Thursday rejected a report from auditors KPMG that contends they withheld essential information during an audit process.

In letters to the Belgian daily De Financieel Economische Tijd, founders Jo Lernout and Pol Hauspie and fellow former board member Nico Willaert said their cooperation with KPMG was such that the auditing firm was fully aware of L&H’s structure and its Korean activities.

The company is being investigated for alleged fraud after admitting last year to accounting irregularities at its Korean unit. The fallout forced the once high-flying speech recognition and translation technology firm to seek bankruptcy court protection in Belgium and the United States.

Lernout, Hauspie and Willaert were brought in for questioning Thursday by examining Judge Kristof Vulsteke, lawyers said.

Prosecutor Jean-Marie Coppens said no decision had yet been made on whether they would be held in investigative custody or released. He also said he could not confirm a report on VRT radio that said investigators also searched Lernout’s and Hauspie’s homes.

Lernout and Hauspie were not expected at a special shareholders meeting Friday in the city of Ieper, where the company’s new management and KPMG will provide an explanation of the events that have lead to the dramatic decline of the company.

No new revelations were expected, however, and the only issue up for a vote is new rules on how board members will be appointed.

The three former directors have requested that their letters be read at the meeting. They blamed KPMG for some of the problems with the Korean operation.

L&H spokesman Ron Schuermans said the company had no immediate comment on the letters.

KPMG spokesman Jonathan Hawker said the firm will respond in full at the meeting to the charges in the letter.

``We are confident that shareholders will see this for what it is: a desperate act by desperate men, who know they have defrauded not only KPMG but also shareholders throughout Belgium and the rest of the world,″ he said.

KPMG is suing Lernout, Hauspie, Willaert and another former executive, Gaston Bastiaens, in civil court for allegedly obstructing an audit last year by giving false information.

L&H said Wednesday it has filed a criminal complaint in Korea against the former president of its subsidiary there, accusing him of fraud.

An auditor’s report commissioned by L&H’s new chief executive, Philippe Bodson, revealed this month that 70 percent of the roughly dlrs 160 million worth of sales reported by the Korean subsidiary between September 1999 and June 2000 was fictitious.


On the Net: Lernout & Hauspie: http://www.lhsl.com

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