How the Inventors of Dragon Speech Recognition Technology Lost Everything 606
First time accepted submitter cjsm writes "James and Janet Baker were the inventors of Dragon Systems' speech recognition software, and after years of work, they created a multimillion dollar company. At the height of the tech boom, with investment offers rolling in, they turned to Goldman Sachs for financial advice. For a five million dollar fee, Goldman hooked them up with Lernout & Hauspie, the Belgium speech recognition company. After consultations with Goldman Sachs, the Bakers traded their company for $580 million in Lernout & Hauspie stock. But it turned out Lernout & Hauspie was involved in cooking their books and went bankrupt. Dragon was sold in a bankruptcy auction to Scansoft, and the Bakers lost everything. Goldman and Sachs itself had decided against investing in Lernout & Hauspie two years previous to this because they were lying about their Asian sales. The Bakers are suing for one billion dollars."
Two lessons here (Score:5, Insightful)
Lesson 1: Just because you paid someone 5 million dollars doesn't mean they have your best interests at heart.
Lesson 2: If a deal involves putting all your eggs in one basket, you should assume that the basket is faulty, and that everyone knows it but you.
Re:Why civil? (Score:4, Insightful)
Fraud is GS middle name. They will bet for you and bet against you out of both sides of their wallet.
Power to them (Score:5, Insightful)
Re:Ironic (Score:5, Insightful)
No, they are actually te baddest of te bad. Responsible for Euro crisis, credit crisis, mortgage crisis et al. Too smart and too greedy. It's high time Goldman Sachs and former associates are made to PAY BACK what they STOLE!
Re:Why civil? (Score:4, Insightful)
Sad (Score:5, Insightful)
Re:Two lessons here (Score:5, Insightful)
Lesson 2: If a deal involves putting all your eggs in one basket, you should assume that the basket is faulty, and that everyone knows it but you.
Lesson 3: If you're a first time entrepreneur, and you've managed to become successful and now want to maintain that by going to reputable industry leaders for advice and support, you're gonna get raped. They don't want more successful people; it cuts into the profit margin of those who already are.
Re:Why civil? (Score:5, Insightful)
Yes, out of the tens of thousands of emoyees everyone is supposed to know what everyone is doing
And a few there found that l&h was a fraud before it blew up
If corporations are people, then they're responsible for the relationships between the different thoughts in their heads.
When a corporation makes a huge profit, the top execs are always willing to accept reponsibilty and accept an obscene bonus. When the corporation does something bad, shouldn't they be responsible for that, too?
Re:Why civil? (Score:5, Insightful)
There is no hell.
The only way to torture these criminals is while they're alive. Get to it.
Re:Two lessons here (Score:4, Insightful)
OTOH, from the short summary it sounds like they may have a case.
Re:Why civil? (Score:4, Insightful)
There is no hell.
The only way to torture these criminals is while they're alive. Get to it.
Indeed. The whole idea of "heaven" and "hell" was invented by the dominant classes, to keep the little guys at bay: "yeah, we're kinda rich now, and your life sucks monkeyballs, but one day ye shall inherit the earth, the eternal life in heaven awaits you, while we are at grave risk of going to hell".
Re:Ironic (Score:5, Insightful)
They should have been left to die, rather than bailed-out. (i.e. Vote no on TARP rather than help GS.)
Re:One! (Score:5, Insightful)
Trading is not stealing (Score:5, Insightful)
I lean left on local standards (those of European social democracy) so I'd probably be something like "extreme left" on American standards (if we consider Democrats a left-wing party). I have no love for either Goldman Sachs or the whole sector they operate in... that said, you can hardly call what they did "stealing".
Are they unethical? Sure. Have they broken some laws by deceiving regulators? Probably. Misleading advertising? Might be. Fraud? Depends on the contracts they've used... but stealing? No. They've simply not cared about the fate of their clients - or the society - except where they had the economic incentive to do so. That kind of stuff happens when you have free markets.
For any given amount of freedom in the markets, you get some good and some bad sides. You thus choose a level where the good sides outweigh the bad ones... and acknowledge that the decision also leads to some undesired results. What doesn't work is choosing one level, at first ignoring undesired results and then, when they become too apparent, call them stealing, etc. without making an argument for choosing another level of freedom in general.
I was working for an L&H competitor at the tim (Score:5, Insightful)
... and everyone in the industry knew that they were full of shit with their finances. The two founders - Lernout and Hauspie - were accountants, not technologists. The company had significant investment from the Belgian government, and L&H were politically well-connected enough to keep milking that funding source as they rode the tech frenzy of the 90's. In every instance where we competed against them, they always bid at ridiculously low prices that couldn't possibly be economically sensible. They had some decent technology, but their business practices were always suspect. It was very likely the taxpayer financing which kept their bubble from bursting before it did.
To be fair, Dragon was primarily involved in desktop ASR, whereas L&H (and my company - Voice Control Systems), were focusing on telephony applications. So, the Bakers may not have been fully acquainted with L&H's reputation. But, really, they should have been extremely suspicious of this deal, especially when the offer was changed to 100% stock. TFA didn't say what the value of some of the competing offers were, but I'm guessing they were substantially less than $580M. If it sounds too good to be true ....
None of this is to excuse Goldman, which apparently was hired to do something that they did not do. And clearly, the Bakers were done an injustice. But, something tells me that they were willfully blind to the possibility that this offer was unjustified. And for that, they should blame themselves.
Re:Why civil? (Score:5, Insightful)
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Re:Why civil? (Score:5, Insightful)
They will bet for you and bet against you out of both sides of your wallet.
fixed that for you
Re:They are the good guys (Score:5, Insightful)
Is that the same "ethical wall" the investment banks were supposed to use when bidding in the LIBOR scandal [google.com]?
There are plenty of rules prohibiting many ethical and criminal violations in the banking industry. Of course, we're finding out more and more that the banks are more in the "rules are made to be broken" mentality these days (and probably all days)...
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Re:Sad (Score:4, Insightful)
Actually, they sold at just about the right time, Half a bil is not an untidy sum for the product they had at the time. They just got swindled by GS.
I'm not sure GS swindled them, but I'm sure GS didn't give a damn. Same thing happened in the mortgage industry: GS didn't fill-in mortgage applications with false information, but they sure didn't mind legally profiting from the sh!tstorm that followed -- not their problem.
At least someone at Lernout & Hauspie Speech Products went to prison.
Re:Why civil? (Score:3, Insightful)
the top execs are always willing to accept reponsibilty and accept an obscene bonus
Who decides what is and what is not obscene? Shouldn't that be the decision of the shareholders? If the shareholders vote for the bonus, the what business is it of those who aren't shareholders? If you want a say on pay at Goldman then buy some of their shares and vote them. If more of the occupy people did this instead of screaming in the streets and voted as a block, then perhaps something might actually change. Maybe they should each buy 20 shares of Goldman Sachs [yahoo.com] instead of that Mac Book Pro? A strong minority vote at the shareholder's meeting, binding or not, can provoke greater scrutiny and perhaps lead to bonuses more in line with long term performance of the company and the value thus created for shareholders who are in fact the owners of the business.
Re:Why civil? (Score:4, Insightful)
The people that want to use that statement to criticize Romney will ignore your explanation, and continue using the out-of-context quote to attack.
Well, since you mentioned Romney... As he said on CNN, which was quoted on The NY Times [nytimes.com] (and other places):
“I know there will always be calls for more. People always want to get more,” Mr. Romney said on CNN. “And, you know, we’re putting out what is required plus more that is not required. And those are the two years that people are going to have. And that’s — that’s all that’s necessary for people to understand something about my finances.”
Yes but "something" is not "everything" and I think the distinction is important in this case. We're not all wealthy enough to hide, I mean "shelter", our (personal and family) income and investments off shore. Most of don't know about owning, running and getting paid by a company, but not having any responsibility/accountability for it...or merely running companies that parent company owns.
Technically correct and legal is one thing, proper and ethical another. Romney likes to blur those lines a lot, like, apparently, most Wall Street people of late.
They don't _care_ if it's true, just whether it's effective.
Again, works for Romney and his friends. Simply put, Romney is a weasel. (Hmm... "Weasel in Chief" has a nice ring to it, don't you think?)
Re:Why civil? (Score:5, Insightful)
Insightful? Almost every purported author of the Bible was at the lowest strung of society, many having been martyred. Exceptions include David, Solomon and Moses. The first two have some not so flattering things written about them and Moses was leader of a bunch of desert dwellers.
Emphasis mine. In fact, spreading the notion that the founders of a religion were poor and martyrs play directly into the hands of those who use religion to dominate and subjugate.
Re:Trading is not stealing (Score:5, Insightful)
Perhaps you've not been paying attention in class.
Goldman Sachs employs former government officials, both elected and appointed.
The government has a large number of officials who are former Goldman Sachs employees.
If you're not familiar with the concept, I'll offer you the term, "Revolving Door", which has often been used regarding government officials bouncing between jobs in the "defense industries".
It's impossible to completely separate Goldman Sachs from government, just as it's impossible to completely separate the defense industries from government.
Re:Trading is not stealing (Score:3, Insightful)
Fraud is nothing more than a type of theft which involves no violence. Con jobs are thefts.
Re:Trading is not stealing (Score:5, Insightful)
http://www.wisegeek.com/what-is-theft-by-deception.htm [wisegeek.com]
Fraud, theft by deception, con, whatever term one chooses to apply, the end result is the same. I'm promised something, which I don't ever get, in exchange for my payment or investment. And, it's theft, just as surely as a burglar commits theft when he removes property from my home.
This parsing of words, in an attempt to hide the fact that theft is indeed theft, only benefits those dishonest individuals who are committing the thefts. White collar thieves want to be distanced from common thieves, so they have created an entire vocabulary for thievery. Some words are applied to common criminals who are to stupid to steal millions. Other words apply to the smarter criminals who have the means to steal millions, or even billions.
Re:Ironic (Score:5, Insightful)
Re:Why civil? (Score:4, Insightful)
The authors of the Bible -- most of whom, in the case of the New Testament, weren't even born yet at the time they decided to write about the miraculous events they described -- were never the people who mattered. As usual, the editors and publishers are the people who determine what you read, from this morning's Slashdot front page all the way back to the Bible.
Religious memes obey fitness functions, just like anything else subject to evolutionary pressure. If the ruling classes had not found Christianity so darned useful, the Bible would just be another one of a thousand forgotten religious texts, waiting to be discovered by scholars in a hole in the ground, reported at a conference attended by perhaps two hundred people, and described in a journal that perhaps five hundred professors and grad students would ever read.
Re:Why civil? (Score:2, Insightful)
Please, do show how Christianity "was invented by the dominant classes, to keep the little guys at bay". All you do by saying that is expose yourself as having done little to no study on the topic of philosophy and theology.
Please do explain Saul of Tarsus's conversion on the road to Damascus. Saul had nothing to gain and everything to lose by becoming a Christian. Please do explain the uncanny historical accuracy of the works of Luke, with details like the nicknames of local leaders, depth of local waters, local topography, and other tidbits that intersect with and have been confirmed by secular history and archeology. (The Book of Acts in the Setting of Hellenistic History) Please do explain how 11 of the 12 disciples, who personally KNEW if what they were saying was true or false, went to deaths with not one of the 12 recanting at any point. (This is different than a Muslim Jihadist, who simply believes that Islam is true, the disciples KNEW first hand if what they were preaching was true. They were there.)
To add on to that, who would make up a religion like Christianity? The disciples are frequently shown to be inept idiots, frequently not understanding Jesus's teachings before the crucifiction. Peter is rebuked and called Satan by Jesus himself. All the disciples deny Jesus and run away in his hour of need. Women, whose testimony was worthless in 1st century Jewish culture, are the ones who find the empty tomb. Even after this the disciples still doubt the resurrection. Jesus's own family does not believe him during his life and in one passage try to cart him away as being crazy.
All I typically get is explanations that have been rejected by scholarly critics of the new testament decades or even centuries ago. (Apparent death, hallucination, stealing the body, etc.)
If you want to see what made up scripture looks like, go read the Apocryphal Gospels, forgeries from the 2nd century AD.
Was Christianity abused at some points in history? Yes. Does that by itself mean it is false? No.
Atheism was abused and used to commit the largest cases of mass slaughter in history, does that by itself mean it is false? No.
What you need is philosophical argumentation and weigh it between the two worldviews.
Christianity claimed that the world was created a finite time ago, thanks to modern science we now know this happened around ~14.5 billion years ago.
Atheism, along with some eastern religions, claimed an eternal universe until that was contradicted by the evidence.
Christianity posits a first uncaused cause that prevents an infinite regress of causes. (Atheists who say "Who created God" simply show that they do not understand the question or the answer.)
Atheism has no plausible first cause, all ultimately end in an infinite regress, which cannot exist. (How many people here understand the problem of an infinite regress?)
Science flourished under Christianity and not elsewhere in the middle ages because Christian philosophy assumes an orderly, understandable universe. You cannot even start trying to do modern science without those presuppositions.
Atheist philosophy has no grounds for assuming an orderly/understandable universe. People like Dawkins reject it, and then do science that assumes it, not realizing the contradiction.
That's not to say Atheist philosophy hasn't been useless, it has posited many good questions that required serious consideration and answers. The main problem is that Atheists today continue to drum on questions that were answered decades, if not centuries ago. If they DO discuss an answer, they almost always either misun
Re:Why civil? (Score:3, Insightful)
From the summary:
It's not that they didn't check or didn't advise that they didn't check.
They had evidence to suggest it was a bad idea (they would not invest with L&H) and did not disclose that.
It was all about getting the commission and nothing about ethics or doing right by their customer.
Re:so what exactly is 'stealing', im sorry (Score:2, Insightful)
im a little confused as to what you would actually consider 'stealing'.
my favorite definition is from Jennifer Aniston's character in Office Space.
you take something thats not yours. and then it becomes yours.
Like a breath of air? That character's definition renders all utilized matter and energy on the planet "stolen."
In my view, an entity needs to have been deprived of something that belonged to them in order for a theft to have occurred.
Re:It's unfortunate ! (Score:5, Insightful)
The way for geeks to survive is to ally themselves with people much badder than lawyers or politicians: professional assassins. For all the power that a lawyer or politician has, they're nearly powerless against a professional assassin. Only the highest-ranking officials get security details, most politicians don't, and I don't think I've ever heard of a lawyer with a bodyguard.
I don't know if this is a joke or not, but the underlying idea is that there are some people who can get away with being scumbags. Many of them happen to also have the ability to screw over large numbers of other people for personal gain without any real consequences. That's a bad combination. I wouldn't encourage anyone to follow the OP's advice, but it has always surprised me that there aren't more people getting shot for the crap they pull.
Re:Why civil? (Score:5, Insightful)
The shareholders don't get a vote.
Okay, technically, thanks to the recent financial reform, stockholders get a non-binding vote, but the execs can (an do) just ignore it and pay themselves whatever they want.
Furthermore, if you had any knowledge of how corporate votes work, you would never suggest something as moronic as democracy-through-share-purchasing. To get a significant portion of the vote, you'd need around 10 million people dropping $2000 each... except trying to buy 200M shares would send the price skyrocketing. So the people whose lives get toyed with by these companies need to pay the thieves hundreds of billions of dollars just to be able to vote on a non-binding resolution? I'd rather buy a torch and pitchfork.
Re:It's unfortunate ! (Score:5, Insightful)
In my experience from being around the technologically astute, the problem solvers, the artistic, the inherently naturally talented people I would have to agree.
The issue is that many of those types of people aren't "type A" personalities. They aren't cut-throat leaders and the corporate project manager types. They will create masterpieces, they will design complex and game-changing inventions and they will fix things no-one else understands. But they do it at the behest of someone else who is paying the money or running the project.
They are in their place when they are creating and doing. Their talents would be wasted running the show. Obviously when pressed into service they can, will and do lead - brilliantly, but they don't seek it out.
When these talented people are busy seeing the big picture in order to lead they don't have the time to focus in on the minutia they are so good at seeing. When they are in "the zone" they can't be bothered to see the big picture, it is just a distraction at the time.
There are few people who are both brilliantly creative AND also type A. I know of one who made his mark, Steve Jobs.
Re:It's unfortunate ! (Score:5, Insightful)
One easy solution is to demand cash, not stocks. Or mostly cash, and some stocks. I never heard of anyone going bankrupt from accepting cash (what happens afterwards, well...). Trusting someone to make you money based on a promise... not so much.
Re:Ironic (Score:5, Insightful)
Of BOTH Parties, (D) and (R).
All you people out there that think the (R) or (D) party is better than the other are just as fooled as those you ridicule across the isle.
Re:Ironic (Score:5, Insightful)
So we have an economy inflated at 12% per year, and yet cars don't cost 12% more every year, nor does clothing, or food, or pretty much anything you'd consider actual inflation.
Your calculations make me think you are one of those that think that a fixed money supply is the way to go. As it happens, it's the fact that the US money supply is actually growing that is making sure that the US isn't in the same hole as Southern Europe does: Countries where there's a whole lot of debt, yet monetary policy keeps inflation at bay like a vise. What you get then is tax increases and government cuts, which slow down the economy, which bring in even more increases, creating the death spiral that we see in Greece and Spain.
There has been more borrowing that can be repaid. That's pretty darned clear. So the question is, who pays the piper. If you do not touch the money supply at all, those that pay are those that borrowed... except for the part that they can't, so you get massive bankruptcies and a sinking economy. Our good friend the Money Illusion makes it extremely difficult to make salaries go down, which a contracting economy needs. If instead you have a more expansive monetary policy, then inflation both makes sure that money is invested instead of stashed in a mattress, which is good for the economy, and makes it far easier to lower salaries with respect to the entire economy, which is temporarily needed in recessions.
Hard money didn't solve jack squat for centuries. It wouldn't solve anything now either.