Ypre's Keepers --------------- Interests can't remain pure: conservationists inspired by nature have to follow developments in synthetic fuel, sports fans into cutting-edge performance find out a lot about drugs, and technology freaks soon find themselves thinking about money. Filthy mammon, preferably in large amounts. So it's natural, almost correct that we extend our interest from language and speech technology to the language and speech industry. We develop the technology to be useful, and in a free market, that means someone ought to be willing to pay for it. You just need an office, production facilities, distribution channels, marketing strategies, legal representation, calculations of marginal return, ..., and so you buy a couple of suits, or you go into business with people that already have them. Or maybe they buy you. For a while it looked as though the speech and language industry would have flagship, a most prominent, eminently successful undertaking we could all look to for inspiration, i.e., financing. Lernout and Hauspie Speech Producs (LHSP) was founded in Ypre in 1987 and grew steadily in its concentration of language and speech expertise. LHSP had product offerings in virtually all the language and speech application areas, especially speech dictation, text-to-speech synthesis, machine translation, and translation assistance. The colleagues at LHSP I've had contact with are technically serious. Things looked good in Ypre. The rule of the "new economy" is market share, and therefore growth, and LHSP grew. One lost track of all the companies they acquired. When LHSP took over Dictaphone and Dragon Speech Systems at the end of March, 2000, its stock was traded at $65. Counting the two stock splits L&H had, its value had risen by a factor of 25 since 1995 (introduced at $11). It had become the fifth largest company in Belgium, and its two founders were minor folk heroes. It unraveled fast. In August of last year The Wall Street Journal accused LHSP of listing sales in Korea too optimistically. LHSP promised a quick audit that kept everyone waiting--by the time it was done, the Security and Exchange Commission had begun an investigation into the Korean connection, and also a second investigation into further allegations that LHSP had set up phony "language development companies" (LDC's) in Singapore, listing them again as customers, but receiving no payment for the base systems the LDC's were to customize. Under pressure LHSP admitted bookkeeping irregularities over the previous 30 months. The long awaited audit by KPMG accused LHSP board members of fraud. The stock value fell regularly during the fall until it was removed from trading in New York and Brussels, almost simultaneously. It was valued at about 1% of the high ($0.70) in unofficial trading in January. Not just LHSP, but also Flanders Language Valley, an investment fund that cooperated closely with LHSP, was also accused of fraud. When a court appointed trustees for LHSP, it came to light that it was largely owned by L&H holding company, which effectively controlled the LHSP board. This made it resistant to reform, even recently. A picture emerges of murky business relations, deceptive practices, and massive conflicts of interest. There are big losers in all of this, most conspicuously 1,000 (of 6,500) former LHSP employees that have been laid off; the former owners (stockholders) of Dragon and Dictaphone, who were paid in LHSP stock; and the approximately 15,000 small stockholders who are suing former board members. Who can blame the small shareholders? They were encouraged by the investments by partners as serious as Dresdner Bank and Deutsche Bank, Artesia and Fortis, all of whom waited until court proceedings started before pulling out. Language and speech technology? --Lots of companies' stock has slid with LHSP, and this is translated rapidly to less money for R&D. My (few) business audiences ask about this, so people certainly associate us with the LHSP scandal. The interest is at the level of juicy gossip, so maybe there are not serious worries about the technology as a whole. But investors and agencies with subsidies are likely to be more cautious. Jo Lernout has been the most colorful figure throughout. When we film it, we'll want Michael Gambon to play Lernout, ambiguous, uncomprehending and blustery when the rest of the LHSP board had gone into hiding, out of his league in international finance, but scrappy even then. When the Wall Street Journal accused LHSP of inventing customers, Lernout responded with fantasies about a take-over conspiracy among Wall Street's short sellers. And a Belgian judge pointedly told Lernout that he wanted financial disclosure, not speeches while refusing LHSP's first request for protection under bankruptcy. Language technologists can take it on the chin.