According to a report by The Wall Street Journal, the request had been rejected due to the "poor content" of the request. In addition, L&H hadn't submitted full audited data, which hurt the firm.

However, the court said that a new request for bankruptcy protection was possible, the Journal reported.

Johan Verbist, a lawyer for L&H's main creditors, reportedly told the Journal that two scenarios were possible after the court's rejection.

L&H would provide full audited figures and a "solid" restructuring plan. In this case, creditors would be willing to discuss further financing, on the condition that bankruptcy protection was given. The second scenario would be an admission of insolvency by L&H, which would result in the liquidation of the company, the Journal reported.

Verbist reportedly told the Journal it was unlikely that the five banks that make up L&H's main creditors would try and claim assets before they hear more from Lernout.

At the end of November, 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 bankruptcy protection in Delaware, the New York Times reported earlier.

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 company listed assets of $2.37 billion, the Times stated.

Prior to filing for bankruptcy protection, 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."

In addition, The Wall Street Journal, in an earlier report, cited 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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