Belgium's Biggest Corporate Fraud Trial Opens

Two former Belgian business champions went on trial on Monday, charged with defrauding investors of up to $300 million.

Two former Belgian business champions went on trial on Monday, charged with defrauding investors of up to $300 million in the country's biggest ever corporate crime trial.

Jo Lernout and Pol Hauspie, feted as local heroes in the late 1990s for their innovative speech recognition technology company, are accused with 19 others of falsifying accounts and stock price manipulation from 1997 to 2000.

Both say they are innocent.

Lernout & Hauspie Speech Products (LHSP), founded in 1987, grew into a group worth almost $10 billion and drew accolades from top politicians, Belgium's Crown Prince and Microsoft founder Bill Gates.

The company's shares, listed on Nasdaq and Easdaq, hovered at just under $20 for most of 1999, shot up to about $70 in March 2000 but tumbled to below $10 by October 2000.

Thousands of investors, including public bodies, lost millions of dollars. More than 13,000 of them were represented on Monday in a common action led by shareholder advisory group Deminor and consumer association Test Achat. The groups are seeking damages of $250 to $300 million.

Prosecutors say the company inflated its sales figures over the four-year period in which the stock price soared. Its accounts seemed to show that sales to South Korea in particular had rocketed.

The trial is being held in a conference centre in the Flemish city of Ghent as no court room could accommodate the number of irate investors wanting to attend.

The 21 accused included internal auditors, external auditors KPMG and Dexia Bank, which became embroiled in the case through its purchase of Artesia Banking Corporation, a financial services firm that lent money to the group.

Dexia agreed in February to settle part of a suit by LHSP investors for $60 million.

If found guilty, the defendants could face prison terms of up to five years.