Ex-CEO Arrested on Fraud Charges
A former chief executive of Belgium’s troubled Lernout & Hauspie Speech Products was in a Boston-area jail Sunday after being arrested on a Belgian warrant accusing him of fraud and other charges, a U.S. Marshal spokesman said.
Authorities arrested Gaston Bastiaens, 54, Saturday while he was sunbathing in the backyard of his home in the Boston suburb of Winchester, Mass., Chief Deputy U.S. Marshal Timothy Bane said.
Accounting and fraud allegations last year sent L&H; stock into a tailspin, erasing nearly $10 billion in shareholder value.
Bastiaens is expected to appear in U.S. District Court in Boston on Tuesday to face charges of financial fraud, insider dealing, stock market manipulation, violating bookkeeping laws and swindling, Bane said, reading from the warrant.
A U.S. judge in Boston issued the warrant at the request of Belgium, which is expected to seek the extradition of Bastiaens.
L&H; has U.S. headquarters in Burlington, Mass. Before fraud allegations surfaced, the firm was Europe’s largest maker of speech recognition and translation software. It also attracted millions of dollars in investment from software giant Microsoft Corp.
Bastiaens was president and chief executive of the company when the Wall Street Journal and others reported accounting irregularities at its South Korean subsidiary.
An investigation by the Securities and Exchange Commission followed. The company’s accountant, KPMG, said its auditor’s report for L&H;’s 1998 and 1999 financial statements should no longer be relied upon.
After an internal company audit, L&H; said it would have to restate its revenue from 1998 to the first half of 2000. The company also said a cash shortfall of about $100 million was discovered at its South Korean subsidiary. Most of the unit’s sales were fictitious, according to an audit commissioned by the company.
The company’s board forced Bastiaens to resign last November. The Nasdaq Stock Market has since delisted the company’s stock, and the Easdaq, the pan-European stock market, suspended the company’s shares indefinitely.
Several L&H; directors and executives, including founders Jo Lernout and Pol Hauspie, have resigned from the company amid the scandal.
