The Korean subsidiary of Belgian speech recognition software company Lernout & Hauspie fraudulently inflated sales figures by 70% according to an investigation. The parent company is said to be considering legal action against four Korean banks and some of its own former executives.

An investigation was launched by PricewaterhouseCoopers into the Korean business because revenues of $100 million were apparently missing. It revealed that the subsidiary misrepresented its real income between September 1999 and June 2000 through agreements with customers and banks.

The parent company’s recently appointed chief executive, Philippe Bodson, described the fraud as very sophisticated. His appointment came after the company filed for bankruptcy protection late last year when it admitted to accounting irregularities.

KPMG, the company’s auditors during the period of the fraud, are suing the former management in Belgium, alleging that senior executives deliberately misled the firm.

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