Flanders Language Valley Fund (FLV Fund) has announced that it has written-off $1.46 per share for the fourth quarter. This makes up the $30m which the company says was misappropriated by the former head of Lernout & Hauspie Korea, John Seo.
FLV Fund had planned to use the $30m in its FLV Fund Korea for investment in technology companies. L&H Korea ‘assisted logistically’ with setting up the fund. Although FLV Fund Korea had not been launched, the $30m it had put towards the fund was used as collateral to a loan to Mr Seo “as a private individual”. FLV says that the money was pledged by Seo to Hanvit Bank, a major Korean Bank that is also a customer of L&H Korea. Hanvit Bank then chose to call in this amount prior to the deadline it had set Seo for honouring interest payments on its loan to him.
FLV Fund said the $30m collateral agreement was done at the instruction of an “irregularly constituted” board of directors of FLV Fund “without prior notification or permission” of the parent company. Mr Seo has been suspended from all duties at L& H Korea.
FLV Fund is taking legal steps to recover the money. Nonetheless, a company statement says: “Due to the current uncertainty concerning the possibility to recover the funds, FLV Fund will take extraordinary charge of a total amount of $30m or $1.46 per share in the fourth quarter.
“Although this incident is a drawback, we remain confident that in light of the factual and legal arguments we intend to make, FLV Fund’s rights will prevail and be recognised. Even after this incident, FLV Fund will have a sufficient cash position,” said Philip Vermeulen, managing director of FLV Fund. FLV’s shares currently stand at $5.80.
Last week, Lernaut & Hauspie was granted creditor protection in Europe. The protection will last for an initial six months to the end of June.
L&H had already won protection in the US, where it faces investigations by US and European regulators as well as a slew of shareholder lawsuits alleging that it misrepresented its sales. L&H chairman Roel Pieper said the company would start immediately to cut about 20 per cent of its workforce worldwide as it restructures its operations. Yesterday, Lernout & Hauspie, said it expected to continue making losses until 2002.
FLV Fund says it is the first global selective fund to focus entirely on providing venture capital to applications of Speech, Artificial Intelligence and Language technology (abbreviated to S.AI.L.). It has been publicly traded on EASDAQ since July 1998 (EASDAQ ticker:FLVF)and its investor base includes Microsoft and Cisco Systems. During the 1999 financial year the Fund achieved a total profit of $13.6m. The company is headquartered in Belgium and has offices in Singapore, Boston and in Silicon Valley.