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Let the finger-pointing begin. KPMG Bedrijfsrevisoren, the outside auditor for bankrupt Lernout & Hauspie Speech Products N.V., claims it has proof that former L&H managers impeded the accounting firm’s audit by providing false information and instructing its employees to “mislead KPMG in an active way.” KPMG, the Belgian subsidiary of KPMG International, makes the charge in a report the firm released Thursday. A Belgian bankruptcy judge ordered the report to explain KPMG’s audit of the troubled Belgian speech recognition technology company. L&H is operating under bankruptcy protection in Belgium and the U.S. over widespread accounting irregularities and allegations of fraud in its revenues for the fiscal years 1998, 1999 and the first half of 2000. The company has said that it may have overstated revenues during that time by as much as $277 million. Legal sources say the release of the report is the latest step in a legal dance to identify who should be held liable for the L&H scandal. “A number of parties have input into the audit process,” said Robert Rosenberg of Los Angeles law firm Latham & Watkins. “In a situation such as this, it takes a while to shake out who defrauded whom, who should have discovered what and who should ultimately be liable.” KPMG had previously filed a civil lawsuit against former L&H managers in Ieper, Belgium, arguing that they deliberately provided “false, inaccurate or incomplete information” while KPMG was trying to prepare a court-ordered report on the company’s restated financial statements for 1998, 1999 and the first half of 2000. The former managers were unnamed. KPMG itself is facing litigation related to L&H. Lernout & Hauspie shareholders earlier this month filed a class-action lawsuit in the U.S. District Court in Boston, alleging that KPMG International and three of its units — KPMG Belgium, KPMG UK and KPMG LLP — failed to comply with many Generally Accepted Accounting Principles. KPMG’s audit of L&H between 1998 and 2000 “was so deficient that each amounted to no audit at all,” the shareholder suit charged. The KPMG report cites minutes of meetings, internal L&H memos and e-mails as proof that L&H misled the accounting firm, and it implicates in the fraud cofounders Jo Lernout and Pol Hauspie and former senior executives Gaston Bastiaens and Nico Willaert. “The former top management had given explicit instructions to conceal the truth from KPMG,” the KPMG report stated. L&H is scheduled to hold a court-ordered shareholders meeting in Belgium April 27. Copyright (c)2001 TDD, LLC. All rights reserved.

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