According to a report in The New York Times, Lernout & Hauspie and its Dictaphone division, a Connecticut-based competitor that it acquired a year earlier, and L&H. Holdings USA, a unit formed to own the recently purchased Dragon Systems, also filed for protection.

Lernout & Hauspie said it would also file for similar protection in Belgium, the Times reported.

The company reportedly has $255.3 million in short-term loans, including more than $200 million due by the end of March. A long-term debt of $234.3 million also hangs over L&H, the Times reported. The company listed assets of $2.37 billion.

Stock prices for the former industry leader rose above $70 within the last year; however, this month the company's shares were suspended indefinitely on Easdaq, the European stock market, and on Nasdaq, where the price plummeted below $7, the Times said.

Earlier on Wednesday, a group representing 14,000 minority shareholders in Europe reportedly asked a Belgian prosecutor to demand the company seek protection in commercial court to avoid bankruptcy, the Times reported.

Stonington Partners, which owned 96 percent of Dictaphone before its sale to Lernout & Hauspie, also took a blow when it filed a lawsuit in Delaware Chancery Court on Monday, hoping to withdraw the $511 million merger, the Times stated. General Counsel Judith A. Witterschein said the financial figures used in the merger talks amounted to fraud.

Earlier this month, L&H announced it would restate its financial statements for 1998, 1999 and the first half of 2000 due to accounting irregularities uncovered during an internal investigation. Since then, former co-chair and managing director Pol Hauspie, former managing director Nico Willaert, and former chief executive and president Gaston Bastiaens resigned from the firm. L&H also announced the suspension of Joo Chul (John) Seo as president and general manager of L&H Korea and his removal as a director of L&H Korea. Seo was immediately relieved of all responsibilities.

Shortly after the firm's decision to restate its financial results, its independent auditor, KPMG Bedrijfsrevisoren, said that its auditor's reports relating to the company's financial statements for 1998 and 1999 could "no longer be relied upon."

L&H also said that in the course of its investigations, its internal audit committee identified "facts which may have been concealed from its auditor."

The Wall Street Journal earlier this month reported a potential conflict of interest at the Big Five firm, in light of a discovery that the KPMG partner who was in charge of auditing L&H for many years had joined an L&H affiliate last year, shortly after KPMG signed off on the Belgian software company's now-disputed 1998 accounts.

-- SmartPros News Staff

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