Goldman Sachs M&A head says he had no role in Dragon deal

BOSTON (Reuters) - The head of Goldman Sachs Group Inc's mergers and acquisition business denied that he had any role in the 2000 sale of voice recognition software company Dragon Systems to a buyer that collapsed soon afterward.

Dragon's founders have sued Goldman, accusing the Wall Street bank of failing them by advising them to pursue the $580 million all-stock sale to Lernout & Haupsie shortly before the Belgian software company went bankrupt in an accounting scandal.

Gene Sykes, who has spent his entire banking career at Goldman and now runs its M&A business, denied in video testimony played in U.S. District Court in Boston on Friday that he had worked on that deal.

"I am pretty certain I had no involvement, but I also was involved in many transactions and had a lot of people involved in a lot of transactions," Sykes said in a video deposition recorded in December 2011.

While Sykes has spent most of his career in Goldman's M&A operation, during the time of the Dragon deal, he was working at its principal investment area, the department that invests the company's own money.

Janet and James Baker, who founded Dragon and owned 51 percent of it, said they had lost their life's work after they sold the company. They had only sold a few million dollars worth of the stock they had received before L&H's collapse wiped out the value of their remaining shares.

The Bakers and two other early Dragon employees have sued Goldman for several hundred million dollars.

Goldman lawyers have argued that the Bakers hired the bank to structure a deal with L&H, not to investigate it for accounting fraud. They have said that Goldman advised Dragon to hire an accountant to analyze the buyer's stability.

Goldman denied civil claims that include gross negligence and breach of fiduciary duty. The jury trial, which began on Monday, is expected to last two months.

TECH BUBBLE

The deal, and L&H's collapse, came around the end of the technology stock bubble of the late 1990s, a time when investors had been eagerly chasing new and sometimes poorly managed Internet companies.

Sykes, who today has a seat on Goldman's powerful 28-member management committee, said he had been unaware of the specifics of L&H's collapse prior to being called to testify.

"I can't recall that I ever became aware of it independently of hearing that I was going to be deposed in this case," Sykes said, adding that he knew the name was "a newsworthy item at some point years ago" but had not recalled specifics.

Dressed in a tie and white shirt, with his jacket over the back of his chair, Sykes said his role was to advise clients and negotiate deals, but that clients make their own decisions.

"I make sure I try to give them the right advice so that they can make good decisions about the various options they have," Sykes said.

One of the four Goldman bankers who advised Dragon on the deal said in early court testimony that he had reported to Sykes.

Goldman's reputation has been tarnished in recent years by allegations that the company has treated clients shabbily. Earlier this year, one executive leaving the bank published a resignation letter calling the bank a "toxic" place where managing directors referred to their clients as "muppets."

The bank has said that employee performed poorly and left after demanding a raise and promotion that he was denied.

Nuance Communications Inc now owns the Dragon software.

(Editing by Lisa Von Ahn)

Source: http://news.yahoo.com/goldman-sachs-m-head-says-had-no-role-162521908--finance.html

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