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Litigation Release No. 18014 / March 4, 2003

Accounting and Auditing Enforcement Release No. 1729 / March 4, 2003

District Court enters Permanent Injunction in Fraud Action Against Lernout & Hauspie Speech Products

Securities and Exchange Commission v. Lernout & Hauspie Speech Products, N.V. Civ. No. 1:02CV01992 (D.D.C.)

(Securities Exchange Act of 1934 Release No. 47442 / March 4, 2003)

SEC Deregisters Lernout & Hauspie's Common Stock

On February 28, 2003, Judge Paul Friedman of the United States District Court for the District of Columbia entered a permanent injunction against Lernout & Hauspie Speech Products, N.V. (Lernout & Hauspie), a developer, licensor, and provider of speech and language technologies, headquartered in Ieper, Belgium and Burlington, Massachusetts. According to the Commission's complaint, from 1996 through the second quarter of 2000, while its common stock was listed on the Nasdaq National Market System and Nasdaq Europe, Lernout & Hauspie engaged in a variety of fraudulent schemes to inflate its reported revenue and income. The result of this conduct was an international financial scandal and a loss of at least $8.6 billion dollars in market capitalization, borne by investors in Belgium, the United States and elsewhere.

The court's Order permanently enjoins Lernout & Hauspie from violating the anti-fraud, reporting, books and records and internal controls provisions of the federal securities laws: Section 17(a) of the Securities Act of 1933 [15 U.S.C. §77q(a)]; Section 10(b) of the Securities Exchange Act of 1934 [15 U.S.C. §78j(b)] and Rule 10b-5 thereunder (17 C.F.R. §240.10b-5); and Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 [15 U.S.C. §78m(a), 15 U.S.C. §78m(b)(2)(A), and 15 U.S.C. §78m(b)(2)(B)] and Rules 12b-20, 13a-1, 13a-13 and 13a-16 (17 C.F.R. §§240.12b-20, 240.13a-1, and 240.13a-13 or 240.13a-16). Lernout & Hauspie consented to the entry of the order without admitting or denying the allegations in the Commission's complaint

In a related matter, on March 4, 2003, without admitting or denying the findings in the Commission's Order, Lernout & Hauspie consented to the entry of an order, pursuant to Section 12(j) of the Exchange Act, revoking the registration of its common stock. In its Order, the Commission found that Lernout & Hauspie included materially false and misleading information in its financial statements and its Annual Reports on Form 20F and Form 10-K for the calendar years ended December 31, 1996, 1997, 1998 and 1999, and in its Quarterly Reports on Form 6-K or Form 10-Q for the first two quarters of 2000. The Commission also found that Lernout & Hauspie failed to file annual or quarterly reports for any fiscal period subsequent to its fiscal quarter ending June 30, 2000.

The Commission's investigation is continuing with respect to other persons and entities. See also Litigation Release No. 17782.



Modified: 03/04/2003