So, Goldman made $5M from fees due to this deal. They could have potentially made billions if they had known the extent of L&H's fraud during this period, by shorting stock or the options market, so there is absolutely no reason to think that this was intentional or knowingly done. It was far more valuable to Goldman to uncover the fraud than to just get this deal signed, they left hundreds of millions on the table by not doing this research.
It's a heart breaking story, but the shareholders of Dragon did it to themselves, they went to the meeting (without Goldman advisors) and they signed the contracts which traded their valuable stock for stock that ended up being worthless (although nobody knew it at the time due to fraud). Why didn't Dragon insist on a thorough auditing of L&H's books before agreeing to a deal? They went ahead and traded what they had without even looking at what they were getting in return. They made a blunder out of greed, it's common, and it's not anyone's fault but theirs.
If Goldman had certified that L&H was solid, then there might be a leg to stand on here, but they explicitly punted and said it wasn't the job of a banker to audit a companies books. This seems logical to me, and if Dragon didn't like that answer they could have gone and found another investment banking firm to advise them.
What was the 'right' thing for Goldman to do here? Drive to the Dragon office and put a gun to their head, tell them they weren't allowed to go to a meeting with L&H that was set up directly between Dragon and L&H?
> They made a blunder out of greed, it's common, and it's not anyone's fault but theirs.
As the saying goes, "never attribute to malice what can be sufficiently explained by incompetence". The Bakers themselves say the worst part was not being able to complete their work on the technology... I'd rather schalk this one down to naiveté.
It's a heart breaking story, but the shareholders of Dragon did it to themselves, they went to the meeting (without Goldman advisors) and they signed the contracts which traded their valuable stock for stock that ended up being worthless (although nobody knew it at the time due to fraud). Why didn't Dragon insist on a thorough auditing of L&H's books before agreeing to a deal? They went ahead and traded what they had without even looking at what they were getting in return. They made a blunder out of greed, it's common, and it's not anyone's fault but theirs.
If Goldman had certified that L&H was solid, then there might be a leg to stand on here, but they explicitly punted and said it wasn't the job of a banker to audit a companies books. This seems logical to me, and if Dragon didn't like that answer they could have gone and found another investment banking firm to advise them.
What was the 'right' thing for Goldman to do here? Drive to the Dragon office and put a gun to their head, tell them they weren't allowed to go to a meeting with L&H that was set up directly between Dragon and L&H?