History
Lernout & Hauspie was founded in 1987 by Jo Lernout and Pol Hauspie. After a difficult start, it quickly grew, and, in 1995, it went public on the NASDAQ (LHSP), and was also quoted on the now-defunct Brussels-based EASDAQ exchange. Its headquarters were in Ieper, Belgium, and in Burlington, Massachusetts. At its peak, Lernout & Hauspie had a market capitalization of almost US$10 billion.
Flanders played an important role in investing in the company and the surrounding Flanders Language Valley. Lernout & Hauspie quickly became Flanders' pride.
It acquired a number of its smaller competitors, including text-to-speech developer Berkeley Speech Technologies, in 1996. During March–April 2000 Lernout & Hauspie acquired Dictaphone for nearly US$1 billion, then acquired Dragon Systems shortly thereafter. Lernout & Hauspie provided the voice recognition technology needed to propel Dictaphone's voice recognition enhanced transcription system (started by a company called Articulate Systems and sold and supported by a company called The MRC Group—later Fonix before becoming part of L&H).
For some time Lernout & Hauspie was dogged by rumours of financial impropriety, and in early 1999 the Wall Street Journal ran allegations in its Heard on the Street column by Goldman Sachs analyst Robert Smithson that earnings had been overstated. Further investigation by Wall Street Journal staffer Jesse Eisinger led to the revelation on 8 August 2000 of a major financial scandal involving fictitious transactions in Korea and improper accounting methodologies elsewhere. In April 2001 founders Jo Lernout and Pol Hauspie, as well as former CEO Gaston Bastiaens, were arrested in what is considered one of the largest corporate scandals in history prior to Enron. Lernout & Hauspie finally went bankrupt on 25 October 2001 after having struggled for a year.
Many people, especially in West Flanders, were blinded by the company's success and lost large sums of money on Lernout & Hauspie stock. The Flanders regional government became a major Lernout & Hauspie investor through a venture capital arm. During one of Lernout & Hauspie's cash shortages, it guaranteed 75% of a bank loan to the company. Investors and taxpayers alike were hit hard when the company went bankrupt. On September 20, 2010, co-founders Jo Lernout and Pol Hauspie, as well as Nico Willaert, former vice chairman, and Gaston Bastiaens, former chief executive officer, were each sentenced to five years prison (of which three years effective and two years probationary) for fraud by the Ghent Court of Appeals. In September 2012 Jo Lernout began a one-year sentence of house arrest with an electronic ankle bracelet.
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