Former KPMG partner Paul Behets reportedly had been responsible for auditing the books of Lernout & Hauspie Speech Products NV as an employee at KPMG Belgium from 1991 until July 1, 1999, when he left the firm to become chief executive officer of SAIL Trust, a foundation created by L&H co-founders Jo Lernout and Pol Hauspie, The Wall Street Journal reported Monday.

According to the report, Behets said he had been responsible for auditing L&H's books from 1991 until July 1, 1999. Regulatory filings show KPMG approved L&H's 1998 accounts in April 1999, when Behets was still with the accounting firm, WSJ said.

L&H last week said it had discovered accounting errors and irregularities that would lead it to restate its financial statements for 1998, 1999 and the first half of 2000. The irregularities were uncovered during an internal probe launched by the company board's audit committee in September, when the SEC began a formal investigation of the firm, L&H said. The company also announced last week that its co-founders, Jo Lernout and Pol Hauspie, had resigned from their executive posts.

Behets reportedly began auditing L&H in the late 1980s while he still worked for his own accounting firm, Behets, Boes & Co. Behets remained in charge of the L&H audits after he became a partner at the Big Five firm when KPMG Belgium absorbed his firm, and inherited his client roster, including L&H, the Journal reported.

According to the article, Behets said he wasn't aware of any accounting problems during the years he audited L&H's books. Behets reportedly said a team of KPMG managers had worked with him on the L&H audits, and that a special London-based KPMG division, the U.S. Capital Markets Group, vetted the audits before they were filed with the SEC.

Behets reportedly denied that his departure from KPMG to join SAIL Trust created any conflicts of interest, because "SAIL Trust and L&H are completely separate," WSJ said. However, SAIL Trust is endowed with money Lernout and Hauspie raised by selling L&H shares, and L&H lists the foundation as a "related party" in its regulatory filings, the article noted.

According to the report, Theo Erauw, chairman of KPMG Belgium, confirmed that Behets had chief responsibility for L&H audits during his roughly nine years at KPMG Belgium, but declined further comment, citing Belgian privacy laws. Behets, whose career as an accountant spanned 29 years, presided over The Institut des Reviseurs d'Entreprises, the Belgian audit body, from 1995 to 1998, and taught ethics at a Brussels high school from 1993 to 1998, WSJ said.

In addition, L&H reportedly confirmed that another former KPMG accountant, who also used to audit L&H's books, is now employed by a company wholly owned by Lernout and Hauspie.
According to the newspaper report, Chantal Mestdagh, a former senior manager at KPMG Belgium, left the firm in 1998 to become chief financial officer of Lernout & Hauspie Investment Co., an investment fund through which Lernout and Hauspie control part of L&H's stock. Mestdagh reportedly quit KPMG before the firm audited L&H's now disputed 1998 and 1999 books, WSJ said.

The paper cited Behets as saying that Mestdagh reported to him and helped him with the L&H audits while she was at KPMG, and that Mestdagh, who was his assistant when he had his own firm, moved to KPMG with him in 1991.

-- SmartPros News Staff

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