The FLV Fund, a venture capital fund affiliated with speech-recognition software vendor Lernout & Hauspie Speech Products NV (L&H), reported Tuesday that the CEO of L&H Korea apparently has misused US$30 million of the fund as collateral for personal loans.
In preparing to report its financial results for the third quarter, the venture capital company found evidence that L&H Korea CEO Joo Chul Seo misused $30 million of the fund after gaining the approval of an “irregular constitution” of the board of directors of FLV Fund in Korea, the company said in a statement posted on its Web site Tuesday. If the fund determines the money was misused, it will make a provision against the fund for $30 million, the statement said.
FLV is taking legal action against the apparent misuse of funds and moving to replace the board of FLV Fund Korea, the statement said. FLV Fund Korea is not yet operational, pending approval of South Korea’s Ministry of Industry. L&H said Wednesday it had suspended Joo Chul Seo as CEO prior to the allegations and for unrelated reasons, according to published news reports.
The alleged wrongdoing against FLV Fund adds to a pile of woes for the fund and for the affiliated L&H. The software company’s accounting practices are under investigation by the U.S. Securities and Exchange Commission, and the company is auditing previously reported sales figures for South Korea. L&H’s audit follows allegations in the Asian Wall Street Journal that the company inflated sales figures and falsified its list of customers. L&H denied those allegations. Similar charges were made concerning the company’s business in Singapore.
L&H has since seen its stock plummet to $6.21 and its management reorganized. Trading in L&H’s shares has been suspended indefinitely in Europe and in the United States.
L&H has been a pioneer in developing software that would let users control computers through speech. FLV Fund is focused on speech, artificial intelligence and language technology. It had planned to open a South Korean subsidiary to add to locations in Northern California’s Silicon Valley, Boston and Singapore.