A Goldman Sachs lawyer argued to jurors that the founders of speech-recognition pioneer Dragon Systems Inc. are scapegoating the investment bank for their own mistakes in a $580m all-stock sale rendered worthless when the buyer was exposed as a fraud.
Bloomberg reports that in closing arguments Thursday in Boston federal court in a lawsuit accusing Goldman Sachs of negligence, the attorney said Dragon co-founder Janet Baker and Chief Financial Officer Ellen Chamberlain ignored the bank’s advice to hire accountants to further vet Belgium-based suitor Lernout & Hauspie Speech Products NV and rushed the deal amid Dragon’s cash-flow problems in 2000.
'They are making Goldman Sachs into the guarantor of this transaction when no one suspected fraud', the bank’s lawyer, John Donovan Jr., said. 'That’s not turning Goldman into a guarantor. That’s turning Goldman into a scapegoat'.
Donovan blamed Baker, also Dragon’s former CEO, for negotiating a change from a half-cash / half-stock deal to an all-stock deal without consulting the banking team.
'Look, if you decide to play investment banker by yourself, you’re in no position to criticize the investment banker you hired in the process', Donovan said.
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