KPMG’s U.S. Firm May Face L&H-Related; Suit

NEW YORK —  A U.S district judge has ruled that shareholders of speech recognition firm Lernout & Hauspie could file a suit against accounting firm KPMG.

The judge for the U.S. District Court of Massachusetts dismissed cases against KPMG’s British, international and Singapore operations but said the case could go ahead in the U.S. and Belgium.

In a ruling dated Aug. 19 and made available Tuesday, U.S District Judge Patti Saris said various offices of KPMG in the U.S. and Belgium were exposed to “an escalating pageant of red flags” in Lernout & Hauspie’s financial statements. Burlington, Mass.-based L&H; filed for bankruptcy protection in November 2000 amid a slew of accounting scandals.

The judge said KPMG US acted with “recklessness or actual knowledge” on various occasions including the preparation of Lernout & Hauspie’s annual 2000 financial filing for 1999 with the Securities and Exchange Commission.

In a statement, KPMG said the allegations were without merit. “There was massive fraud inside L&H;, involving the company’s executives, officers and outside individuals as well as those who engaged in a concerted effort to defraud both investors and the auditors,” the statement said.

Glen DeValerio, a partner in Boston-based Berman DeValerio, which is representing some of Lernout & Hauspie’s shareholders, said the law firm will seek accounting papers from KPMG relating to its dealings with the technology company.