A&O's Verbeke probed over client's accounts

Allen & Overy stands by senior Belgian partner put 'under suspicion'
after raids on bankrupt client

Allen & Overy (A&O) partner Louis Verbeke and his former firm have been placed under suspicion by the judge leading the inquiry into stock fraud at his former client, technology company Lernout & Hauspie (L&W).
The news follows a raid by Belgian authorities on A&O's Brussels office last month (The Lawyer, 2 July). A second raid to seize L&H documents was ordered by Judge Kristof Vulsteke.
The decision to place Verbeke under suspicion signals that he himself is now being investigated – along with members of L&H's board – to establish whether he shares responsibility for irregularities in the company's accounts. L&H's former auditor KPMG has also been placed under suspicion.
“What plays against him is the fact that he always advocated, as a lawyer, that lawyers should be more closely involved with their clients and that he was present at board meetings of L&H,” said Johan Verbist, a litigation partner at Linklaters & Alliance member De Bandt van Hecke Lagae & Loesch, which represents five banks seeking to recover more than $300m (£211.5m) from L&H.
An A&O spokesman said: “It is our view that the authorities will soon gain confirmation that neither Verbeke nor Loeff Claeys Verbeke were involved in any wrongdoing.”
Verbeke is also president of an Antwerp insurance company now known to be the ultimate owner of 16 L&H startup companies. Some 30 such companies represented a major chunk of the company's turnover in 1998 and 1999. Verbist said: “The most likely reason [that Verbeke has been placed under suspicion] is that the arrested board members may have argued that Verbeke
told them to do certain things or was at least aware.
“As a lawyer, you can always raise the confidentiality right of the client. But once you're placed under suspicion it's your personal decision whether you're bound by professional secrecy.
“In this sense, it's an advantage for him. He can produce anything he wrote for the client.”
L&H filed for bankruptcy last year after an inquiry found that the company may have improperly recorded as much as $277m (£195.3m). Verbist said: “The problem is that L&H reported licence fees from the startup companies as income. The reality was that there was no substance in those startups. It was L&H itself that had to develop the software. Such income cannot be recorded as definitely acquired income.
“If [Verbeke] had given advice to set up certain structures and if he had known that the purpose was to create fictitious turnover, then he has helped L&H to commit fraud. He denies that he has been involved in these structures.”