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Dragon founders’ lawsuit begins

Opening arguments began Monday in the federal lawsuit brought by two Boston technology pioneers against Goldman Sachs, which advised them during the sale of their company to a Belgium firm that later collapsed from a massive fraud.

James and Janet Baker, founders of the speech recognition company Dragon Systems Inc., say Goldman Sachs misled them prior to the 2000 deal and did not adequately vet Lernout & Hauspie Speech Products, which bought the company for $580 million in an all-stock transaction. When Lernout & Hauspie went bankrupt just months later, the stock the Bakers and Dragon’s other stockholders got was worthless. The Bakers, along with cofounders Paul Bamberg and Robert Roth, want to recoup as much as $264 million from Goldman Sachs.

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Attorneys for Goldman Sachs will present opening statements when the trial resumes Tuesday.

The Bakers founded Dragon Systems in 1982. It grew to about 400 employees and produced the breakthrough speech-recognition software Dragon NaturallySpeaking . Dragon software is produced by the Burlington company Nuance Communications Inc.

Michael B. Farrell can be reached at
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