Lernout & Hauspie Speech Products (L&H) listed on the NASDAQ in 1995. In June 2000, the company revealed that nearly all of its growth in recent quarters came from South Korea and Singapore, where sales had increased 100-fold. A subsequent article by the Wall Street Journal raised questions over the validity of these claims. In August, the company's CEO stepped aside and in September it disclosed that the SEC had launched an investigation which prompted a share price collapse. In November, the company disclosed that it would restate its FY98 and FY99 financials and a few days later KPMG withdrew its audits. In December, an internal audit revealed that 34% of sales between FY98 and 1H01 had been faked, although this was later revised up to 45%. L&H triggered Beneish's M-Score for profit manipulation and our Fake Cash Flow Fraud model (suggesting traits in line with past fraud) over most of the period in question. However, the company was factoring receivables which disguised receivable deterioration and a lack of cash flow in some years. L&H is a confirmed fraud. 

Last updated February 2022

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