The US Securities and Exchange Commission (SEC) is investigating financial 'irregularities' at the Korean unit of voice recognition vendor Lernout & Hauspie (L&H).
Apparently, up to $30m from the bank account of venture capitalist Flanders Language Valley Fund (FLVF) has been used as collateral for Joo Chul Seo, chief executive of the L&H Korean unit. The SEC is also investigating 30 startups in Korea that bought licences from L&H between 1998 and 1999.
L&H's Korean unit reported earnings this year of $127m, up from only $1.2m in 1999.
Gohnny Kegelf, a representative of FLVF, said: "There has never been any legal or financial link between FLVH and L&H, although we have logistically co-operated with each other. The [$30m] is still in the bank account of FLVF Korea. We discovered it during regulatory proceedings of an irregularly constituted board that got together and pledged $30m as collateral for Joo Chul Seo."
L&H's management have denied any knowledge of the Korean irregularities, although Gaston Bastiaens, former chief executive, is understood to have known about every deal within the company worth more than £5m, according to a source familiar with the company.
L&H has announced the resignations of three of its directors, including co-founder Pol Hauspie, who is reported to have left the firm for health reasons. Former managing director Nico Willaert, and Bastiaens have also left.
The company has said that its third-quarter results will be $40m lower than predicted. One analyst said: "There were forecasts of $220m, but we announced it would not be more than $165m. We will only reach about $125m - $40m down on the original warning."
L&H is believed to owe banks $200m for the acquisition of Dictaphone, according to Ron Schuemans, communications director at L&H. Industry analysts now believe the firm could eventually be broken up and sold off.
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