According to the docket dated, May 16, 2002, the First Circuit Court of Appeals issued a Mandate on April 4, 2002, dismissing the appeal. Earlier, on July 31, 2000, the Court entered a Memorandum and Order by U.S. District Judge Nancy Gertner granting the defendants' motion to dismiss. A Notice of Appeal was soon after filed by the plaintiffs.
On April 16, 1999, a Notice of voluntary dismissal without prejudice was filed and the case and all related cases in the U.S. District Court for the Eastern District of New York were closed. The case continued in the District of Massachusetts.
The class action suit alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Specifically, the complaint alleges that Lernout & Hauspie Speech Products had improperly accounted for "in-process" research and development of other voice recognition and translation software companies it had acquired since at least 1996. In accounting for those acquisitions, Lernout wrote-off up to 60% of the in-process research and development of the acquired companies. The SEC had commented that these write-offs were excessive. Lernout was forced to assign the excess R&D write-offs to goodwill recorded for its various acquisitions. As a result, the Company was forced to amortize more goodwill, thereby incurring material, added expenses during the Class Period. This, in turn, materially reduced the income the Company reported and will report in the future. Further, during the Class Period, the individual defendants and other Lernout insiders sold 528,176 shares of their personal Lernout holdings for proceeds in excess of $23 million.
Several purported class actions have also been filed in the U.S. District Court for the District of Massachusetts. The first complaint was filed on February 5, 1999.