Big decline in UK unemployment

12 December 2012 Last updated at 08:54 ET

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The number of people out of work fell by 82,000 between August and October, to 2.51 million, official figures have shown.

It was the biggest quarterly fall in unemployment since 2001.

The unemployment rate was 7.8%, down 0.2 percentage points from the previous three months.

The Office for National Statistics also said that the number of people claiming Jobseeker’s Allowance fell 3,000 to 1.58 million in November.

Total pay was up 1.8% compared with the same period last year.

Employment rose 40,000 to 29.6 million, which was the highest figure since records began in 1971.

“We see more people looking for work and actually finding work, so I think there’s a really strong labour market there,” Mark Hoban, minister for work and pensions, told the BBC.

“I think there’s more flexibility in the labour market, although this month we’ve seen a big increase in full-time jobs and no movement at all in the number of part-time jobs.”

David Cameron was challenged in the Commons over “stubbornly high” long-term unemployment

Employment in the public sector fell for the 12th consecutive month, dropping 24,000 to 5.7 million, which was outstripped by a 65,000 rise in private sector employment to 23.8 million.

“The main disappointment was the fact that despite the gains in employment, there is no pick-up in wage growth, which remains at 1.8%, year on year,” said James Knightley at ING.

“The fact that UK employment is rising, consumer confidence is up and anecdotal evidence of retail sales haven’t been too bad, offers some hope that the domestic situation in the UK is stabilising.”

Among the details in the ONS report:

• number in full-time employment rose 44,000


• number in part-time employment fell 4,000


• unemployed 16-to-24-year-olds fell 90,000 to 626,000, excluding people in full-time education


• the biggest regional fall in employment was in Scotland, where it fell 27,000


• the biggest regional rise was in Yorkshire and the Humber, where it rose 48,000

Leader of the opposition Ed Miliband said long-term unemployment was still “stubbornly high” and the problem was of “fundamental importance… to the country as a whole”.

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Things seem to be getting better for young people looking for work. Or at least they are not getting worse. Alas, the same cannot be said for average earnings, which have actually now fallen even further behind inflation in October, with average annual growth of just 1.3%, less than half the rate of inflation.”

End Quote

Speaking at Prime Minister’s Questions, David Cameron said that while long-term youth unemployment was down 10,000, the problem showed the importance of the government’s Work Programme. However, “clearly, there is more to do,” he said.

Surprising strength

Many analysts have questioned why unemployment has not been higher, given the general weakness of the economy.

The flexibility of the workforce has been part of that, according to Ross Walker, UK economist at RBS, who points to the large numbers of part-time jobs in previous months, small rises in average wages and the increase in self-employment.

“None of that fully explains the gap – we would still have expected the labour market to have been rather weaker than it has been,” he said.

“Maybe actually, underlying growth is a little bit better than is being reported.”

BBC chief economics correspondent Hugh Pym said the Bank of England had admitted it did not understand why the labour market was so strong.

“They’re a bit worried about low productivity – in other words, more people in work, but not producing proportionally the amount that you would expect,” he said.

Shadow employment minister Liam Byrne: “We are absolutely not out of the woods yet”

“So is that a sign of a weak economy or an economy that’s got potential to grow in the future? They really don’t know.”

The Office for Budget Responsibility, which makes economic forecasts on behalf of the economy, last week cut its forecast for the peak rate of unemployment to 8.2%, although that still suggests a considerable increase in joblessness from the current 7.8%.

Shadow work and pensions minister Liam Byrne welcomed the fall in unemployment, but stressed that there was also bad news in the figures.

“Pay packets are under intense pressure as the pace of jobs growth slows down – wages are now growing at only half the rate of prices,” he told the BBC.

“Families are under real pressure right now and what today’s figures show is that the Department for Work and Pensions’ big back-to-work programmes are frankly delivering nothing.”

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The Hobbit: Richard Armitage Talks Preparations For Playing Thorin Oakenshield

British actor Richard Armitage admitted it wasn’t a walk in the park to play a J.R.R. Tolkien character in Peter Jackson’s reimagining of “The Hobbit,” the first installment of which is on its way into theaters.

Upon touching down in New Zealand, where the trilogy was shot, the cast had a lot of character preparation to do.

PLAY IT NOW: Martin Freeman Discusses The Hobbit’s ‘Good Chemistry’ & Playing Bilbo Baggins

“We arrived in February 2011 and we went straight into a training program, which was called ‘Dwarf Bootcamp,’ which was literally boots — these huge boots. We learned how to walk, we wrestled with each other, we did archery together, we did sword fighting, hammer fighting, horse riding — everything you could possibly think of,” Richard, who plays Thorin Oakenshield in the film told Access Hollywood at the film’s junket.

In addition, the cast, which includes his former “Cold Feet” co-star James Nesbitt as Bofur, found ways to get to know each other better off set.

VIEW THE PHOTOS: The Hobbit: An Unexpected Journey — New York City Premiere

“We went round to each other’s houses and we cooked food together, we went to the pub and got drunk together, so there was an incredibly great bonding time between the dwarves,” he said.

Richard had plenty of experience sword fighting and horse riding in the BBC America series “Robin Hood,” but it was something else that came in handy during the long days on set.

“I’d done a number of shows where I’d had to use sword fighting and I’d also done horse riding. I’d also pulled guns out of my pocket. That was less useful,” he laughed, likely referring to his recent role in the PBS-import series “MI-5,” where he played a British spy. “But, yeah, you draw on everything. I’d worked at the Royal Shakespeare Company, so the vocal work was really useful to kind of pull that from there. I’d worked in a circus, there were… all sorts of things that were really useful, but the one thing that I do have — for lack of talent — is stamina and that’s the one thing I think everybody needed on this job.”

VIEW THE PHOTOS: Meet ‘The Hobbit’ Cast!

An imagination was useful also, but Richard said what turned out on the big screen was still wilder – and more beautiful – than he dreamed of.

“So many moments… Actually, apart from the eagles — which every single time I’ve seen this film absolutely blows my mind and I can barely keep the tears back and [it has] nothing to do with the pathos of the scene, just that feeling of flight moves me — is the throne of Aragorn, in the beginning of the prologue,” he told Access of the moment that moved him most. “When it got to [filming] that scene, I walked on and… it was just a green cross on the floor with a tiny green chair… [But in the film], they just made this incredible, almost space aged, sort of suspended seat in the middle of this stalagmite. It just blows my mind when I see that.”

VIEW THE PHOTOS: The Brit Pack: Hot Shots Of Stars From The UK!

“The Hobbit: An Unexpected Journey” hits theaters on December 14, 2012, followed by “The Hobbit: The Desolation of Smaug,” on December 13, 2013 and “The Hobbit: There and Back Again,” on July 18, 2014.

– Jolie Lash

Copyright 2012 by NBC Universal, Inc. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Obama election tweet most repeated but Olympics tops on Twitter

(Reuters) – An election victory tweet from President Barack Obama — “Four more years” with a picture of him hugging his wife — was the most retweeted ever, but the U.S. election was topped by the Olympics as the most tweeted event this year.

Obama’s tweet was retweeted (repeated) more than 810,000 times, Twitter said as it published a list of the most tweeted events in 2012. (http://2012.twitter.com/)

“Within hours, that Tweet simultaneously became the most retweeted of 2012, and the most retweeted ever. In fact, retweets of that simple message came from people in more than 200 countries around the world,” Twitter spokeswoman Rachael Horwitz said.

Twitter users were busiest during the final vote count for the presidential elections, sending 327,452 tweets per minute on election night on their way to a tally of 31 million election tweets for the day.

The 2012 Olympic Games in London had the most overall tweets of any event, with 150 million sent over the 16 days.

Usain Bolt’s golden win in the 200 meters topped 80,000 tweets per minute but he did not achieve the highest Olympic peak on Twitter. That was seen during the closing ceremony when 115,000 tweets per minute were sent as 1990s British pop band the Spice Girls performed.

Syria, where a bloody civil war still plays out, was the most talked about country in 2012 but sports and pop culture dominated the tally of tweets.

Behind Obama was pop star Justin Bieber. His tweet, “RIP Avalanna. i love you” sent when a six-year-old fan died from a rare form of brain cancer, was retweeted more than 220,000 times.

Third most repeated in 2012 was a profanity-laced tweet from Green Bay Packers NFL player TJ Lang, when he blasted a controversial call by a substitute referee officiating during a referee dispute. That was retweeted 98,000 times.

This was the third year running that the microblogging site published its top Twitter trends, offering a barometer to assess the biggest events in social media.

Superstorm Sandy, which slammed the densely populated U.S. East Coast in late October, killing more than 100 people, flooding wide areas and knocking out power for millions, attracted more than 20 million tweets between October 27 and November 1.

European football made the list of top tweets when Spain’s Juan Mata scored as his side downed Italy 4-0 in the Euro 2012 final — sparking 267,200 tweets a minute.

News of pop star Whitney Houston‘s death in February generated more than 10 million tweets, peaking at 73,662 per minute.

Romantic comedy “Think Like a Man” was the most tweeted movie this year, topping “The Hunger Games”, “The Avengers” and “The Dark Knight Rises.”

Rapper Rick Ross who notched his fourth No. 1 album on the Billboard 200 chart this year, was the most talked about music artist.

(Editing by Rodney Joyce)

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Timeline: Key dates ahead as Congress confronts “fiscal cliff”

(Reuters) – Sharp U.S. tax increases and government spending cuts will take effect in January unless Congress and President Barack Obama can agree on a package of deficit reduction measures.

With lawmakers rushing to avert events that could trigger another recession, here is a look at key dates ahead, with estimated impacts based on research by the Tax Policy Center and the Bipartisan Policy Center, both non-partisan think tanks.

* December 14. This was the targeted adjournment date for the U.S. House of Representatives, but it has been postponed. The U.S. Senate has not set an adjournment date.

* December 17. Unofficial optimal date to have a “framework” for a deal in place, congressional aides say, in order to permit time for review and procedural delays in Congress. Congress can go beyond this time without much trouble, however.

* December 21. Target date for a final deal that would permit lawmakers a full holiday break, aides say.

The House could be in session through at least December 21 and will not adjourn “until a credible solution to the fiscal cliff has been found,” according to Republican House leadership.

* December 24. Some skeptical aides say Congress will work to Christmas Eve, possibly reaching a deal, or possibly not.

* December 25. Christmas holiday.

* December 26-31. If no deal has been reached by this time to raise the government’s debt ceiling of $ 16.4 trillion, the U.S. Treasury Department will have to take “extraordinary measures” to put off possible default, as it has done before.

If Congress does not have a “fiscal cliff” deal before Christmas, lawmakers may have to return to Washington this week.

* January 1. Expiration of low tax rates enacted under President George W. Bush and extended in 2010 under Obama. This event would raise taxes an estimated $ 1,600 per U.S. household annually.

Expiration of Obama payroll tax cut of 2011 and 2012. This would raise taxes an estimated $ 700 per household.

Deadline for dealing with “tax extenders” such as the corporate research and development tax credit. These and other items must be extended by year-end to be claimed in 2013.

Deadline for fix to the alternative minimum tax. Without action, the AMT will increase the tax bills for an estimated 27 million more Americans. The Internal Revenue Service will need to reprogram systems and delay refunds for millions of taxpayers until late March if the fix is not passed.

* January 1. New taxes take effect under Obama’s healthcare overhaul. One is a 0.9-percent increase in wage income tax for individuals earning more than $ 200,000 a year. The other is a 3.8-percent Medicare tax on investment income above the same level. These take effect regardless of the cliff outcome.

* January 2. Without congressional action to waive or postpone them, spending cuts of $ 1.2 trillion over 10 years begin. Known as “sequestration,” these were put in place in 2011 after a congressional “super committee” failed to devise a fiscal plan.

* January 3. The new Congress is scheduled to convene.

* January 7-11. Congress scheduled to be out of session.

* January 14. Congress scheduled to reconvene.

* January 20. Presidential inauguration day. A public ceremony is planned for the following day.

* February. White House releases annual proposed budget. Treasury exhausts its “extraordinary measures” and U.S. faces possible rating downgrade again.

* March. Funding of federal government expires with the expiration of a continuing resolution.

(Reporting by Kevin Drawbaugh, Richard Cowan and Kim Dixon; Editing by Fred Barbash and Eric Beech)

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TSX ends higher as financials gain; German data helps

TORONTO (Reuters) – Canadian stocks ended higher on Tuesday, helped by a strong showing from banks and other financial stocks as a German poll showed a sharp improvement in investor sentiment in Europe’s biggest economy.

The Toronto Stock Exchange‘s S&P/TSX composite index <.gsptse> added 51.89 points, or 0.42 percent, to close at 12,282.36.</.gsptse>

(Reporting by Alastair Sharp)

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Corruption probe shrouds Quebec in new darkness

MONTREAL (Reuters) – Half a century ago, a new crop of Quebec leaders sparked the so-called Quiet Revolution to eradicate the “Great Darkness” – decades of corruption that kept Canada‘s French-speaking province under the dominance of one party and the Catholic church.

The revolution’s reforms, including cleaning up the way lawmakers were elected and secularizing the education system, seemed to work, paving the way for decades of growth, progress and prominence as Canada emerged as a model of democracy.

Fifty years later, a public inquiry into corruption and government bid-rigging suggests the province’s politics are not as clean as Quebecers had hoped or believed.

Since May, when the inquiry opened in Montreal, Canadians have been getting daily doses of revelations of fraud through live broadcasts on French-language television stations. Corruption involving the Mafia, construction bosses and politicians, the inquiry has shown, drove up the average building cost of municipal contracts by more than 30 percent in Montreal, Canada’s second-largest city.

Last month, Montreal Mayor Gerald Tremblay resigned as did the mayor of nearby Laval, Gilles Vaillancourt. Both denied doing anything wrong, but said they could not govern amid the accusations of corruption involving rigging of municipal contracts, kickbacks from the contracts and illegal financing of elections.

Tremblay has not been charged by police. Vaillancourt’s homes and offices have been raided several times by Quebec’s anti-corruption squad, which operates independently of the inquiry, but no charges have been filed against him either. Police said the raids were part of an investigation but they would not release further details.

“Quebecers lived for several years under the impression that they had found the right formula, that their parties were clean,” said Pierre Martin, political science professor at the University of Montreal. Now, he said, “people at all levels are fed up.”

The inquiry must submit its final report to the Quebec government by next October. It has exposed practices worthy of a Hollywood noir thriller – a mob boss stuffing his socks with money, rigged construction contracts, call girls offered as gifts, and a party fundraiser with so much cash he could not close the door of his safe.

“Even though we are in the early days, what is emerging is a pretty troubling portrait of the way public contracts were awarded,” said Antonia Maioni, director of the McGill Institute for the Study of Canada in Montreal.

Quebec’s Liberals, the force behind the Quiet Revolution, launched the inquiry as rumors of corruption swirled. The government then called an election for September, a year ahead of schedule, in what was seen as an attempt to stop damaging testimony hurting its popularity.

The tactic did not help. Jean Charest’s Liberals lost to the Parti Quebecois, whose ultimate aim is to take the French-speaking province, the size of Western Europe, out of Canada.

‘IT WASN’T COMPLICATED’

According to allegations at the inquiry, the corruption helped three main entities: the construction bosses who colluded to bid on contracts, the Montreal Mafia dons who swooped in for their share, and the municipal politicians who received kickbacks to finance campaigns.

In Quebec, the Mafia has been dominated by the Rizzuto family, with tentacles to the rest of Canada and crime families in New York and abroad. But recently the syndicate has been facing challenges from other crime groups in Montreal, according to the Toronto-based Mafia analyst and author Antonio Nicaso.

The reputed godfather of the syndicate, Vito Rizzuto, has been subpoenaed to appear before the commission, but the date for his testimony has not been set.

The hearings have zeroed in on four construction bosses and how their companies worked with the Mafia, bribed municipal engineers and provided funds for mayoralty campaigns in Montreal, the business capital for Quebec’s 8 million people.

“It’s not good for the economy,” said Martin. “It’s not good for any kind of legitimate business that tries to enter into any kind of long-term relationship with the public sector.”

Quebec’s anti-corruption squad has arrested 35 people so far this year, staging well-publicized raids on mayoral offices and on construction and engineering companies. The squad has arrested civil servants and owners of construction companies, among others.

“I now must suffer an unbearable injustice,” Tremblay said in a somber resignation speech earlier this month after a decade as mayor of Montreal, saying he could not continue in office because the allegations of corruption were causing a paralysis at City Hall.

Some of the most explosive allegations at the inquiry, headed by Quebec Superior Court Justice France Charbonneau, came from Lino Zambito, owner of a now bankrupt construction company, and from a top worker for Tremblay’s political party, Union Montreal.

Zambito, who is seen as one of the smaller players and who also faces fraud charges, described a system of collusion between organized crime, business cartels and corrupt civil servants, with payments made according to a predetermined formula.

“The entrepreneurs made money, and there was an amount that was due to the Mafia,” Zambito told the inquiry. “It wasn’t complicated.”

Zambito said the Mafia got 2.5 percent of the value of a contract, 3 percent went to Union Montreal and 1 percent to the engineer tasked with inflating contract prices.

Tremblay did not respond to emails requesting comment on the allegations of corruption at city hall.

A former party organizer, Martin Dumont, alleged the mayor was aware of double bookkeeping used to hide illegal funding during a 2004 election.

Dumont said the mayor walked out of the room during a meeting that explained the double bookkeeping system, saying he did not want to know anything about it.

Dumont also described how he was called into the office of a fundraiser for Union Montreal to help close the door of a safe because it was too full of money.

“I think it was the largest amount I’d ever seen in my life,” Dumont said at the inquiry.

GOLF, HOCKEY, ESCORTS

The inquiry also saw videos linking construction company players with Mafia bosses. In one police surveillance video, a Mafia boss was seen stuffing cash into his socks.

A retired city of Montreal engineer, Gilles Surprenant, described how he first accepted a bribe in the late 1980s after being “intimidated” by a construction company owner. Over the years he said he accepted over $ 700,000 from the owners in return for inflating the price of the contracts.

Another retired engineer, Luc Leclerc, admitted to bagging half a million dollars for the same service. He said the system was well-known to many at city hall and simply part of the “business culture” in Montreal. He also got gifts and paid golf trips to the Caribbean with other businessmen and Mafia bosses.

Gilles Vezina, who is currently suspended from his job as a city engineer, concurred.

“It was part of our business relationships to get advantages like golf, hockey, Christmas gifts” from construction bosses, he told the inquiry in mid-November.

The gifts didn’t stop there. Vezina said he was twice offered the services of prostitutes from different construction bosses in the 1980s or early 1990s, which he said he refused.

The accusations are jarring for a country that prides itself on being one of the least corrupt places in the world, according to corruption watchdog Transparency International. But experts say corruption in Montreal was something of an open secret.

“The alarm signals have been going off here for 20 years and no one has done anything,” said Andre Cedilot, a former journalist who co-wrote a book on the Canadian Mafia.

Quebec’s new government has introduced legislation tasking the province’s securities regulator with vetting businesses vying for public contracts and allowing it to block companies that do not measure up.

Anti-corruption activist Jonathan Brun was not optimistic.

“You’ve got to use modern technology,” said Brun, a co-founder of Quebec Ouvert, a group that wants to make all information about contracts freely available rather than asking regulators to oversee individual companies. “You’ve got to change the entire system if you really want to fight corruption.”

(Writing by Russ Blinch; Editing by Janet Guttsman, Mary Milliken and Prudence Crowther)

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Tech guru McAfee’s legal appeals win him respite in Guatemala

GUATEMALA CITY (Reuters) – U.S. software pioneer John McAfee, facing deportation from Guatemala to Belize to answer questions over the death of a neighbor, has bought himself some time with legal appeals, the Guatemalan government said on Sunday.

McAfee’s lawyers have filed a request with a local court to grant him leave to stay in Guatemala until his legal appeals against deportation have been settled, which could take months.

“The government of Guatemala respects the courts and we have to wait for them to make a decision,” said Francisco Cuevas, a spokesman for the Guatemalan government.

The government initially said it would deport him straight away after rejecting McAfee’s request for asylum on Thursday.

Guatemala has been holding the former Silicon Valley millionaire since he was arrested on Wednesday for illegally entering the country with his 20-year-old Belizean girlfriend.

Officials in Belize want to question McAfee as a “person of interest” in the killing of fellow American Gregory Faull, his neighbor on the Caribbean island of Ambergris Caye.

The court has up to 30 days to rule on his request, but McAfee’s lawyers said on Sunday they expect a ruling in the American’s favor as early as Monday.

“We are filing a series of papers with the court to attempt to keep me here long enough for the world to see the injustice of sending me back to Belize,” McAfee said in an online news conference on Sunday evening.

McAfee has been evading Belizean officials for nearly a month, saying he fears they want to kill him, and that he is being persecuted for speaking out about corruption in the country’s ruling party. Belize’s prime minister has rejected McAfee’s claims, calling him paranoid and “bonkers.”

McAfee’s attorney, Telesforo Guerra, said that if his request with the court is successful, McAfee would be allowed to stay in the country until the legal suits have been resolved.

His lawyers have filed several injunctions against government officials, alleging McAfee’s rights were violated because his asylum request was not given proper consideration.

McAfee said on Saturday he wanted to return to the United States, and Guerra said he had filed a motion that would require Guatemalan authorities to deport him there and not to Belize.

The eccentric tech pioneer, who made his fortune from the anti-virus software bearing his name, has been chronicling life on the run in a blog, www.whoismcafee.com.

(Editing by Dave Graham; editing by Todd Eastham)

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Weight loss? There’s an app for that

NEW YORK (Reuters Health) – Mobile devices that let people track how much they eat and exercise may help them shed pounds over and above the benefits of a typical weight-loss program, a new study suggests.

Researchers found overweight and obese adults lost an average of over eight pounds more when they had personal digital assistants (PDAs) and occasional phone coaching to help them in addition to a group program.

There’s no reason to think the same wouldn’t hold true for smart phone apps that can log nutrition and activity information and give real-time feedback, they said.

“The number one mechanism through which people lose weight is self-monitoring, just watching what you eat and keeping a record of it,” said Dr. Goutham Rao, from the NorthShore University HealthSystem in Evanston, Illinois.

Rao, who wrote a commentary published with the new study, noted that programs for mobile devices are easily personalized – and readily available wherever people carry their phones or PDAs.

“I’m actually very optimistic that people who are motivated, who can couple the technology with in-person counseling and management are going to be very successful,” he told Reuters Health.

The new study included 69 overweight and obese people in their late 50s, on average, who were referred to a Veterans Affairs clinic for weight-loss support.

All were enrolled in 12 group sessions over six months, which focused on nutrition, exercise and behavioral changes to promote weight loss. Half of the participants were also given a PDA to record their food and activity throughout the day and had a coach who checked in with them by phone.

Most of the study subjects were men who didn’t know much about technology – which made them an extra hard group to reach, said lead researcher Bonnie Spring, from the Northwestern University Feinberg School of Medicine in Chicago.

After six months in the trial, people in the PDA group had lost an average of almost 10 pounds, and 41 percent of them had met the goal of losing at least five percent of their initial body weight. Those in the comparison group had dropped just over two pounds each, on average, and 11 percent had achieved the weight-loss goal.

And at the one-year mark – six months after the mobile devices were taken away – people who’d used the PDAs had managed to keep off most of the weight they initially lost, Spring’s team reported Monday in the Archives of Internal Medicine.

“The issue has always been that it’s possible to help anyone lose weight as long as you invest enough time or money into the effort,” Rao said.

The benefits of using an app on a mobile device, he said, are that it can be cheaper and widely available – and can help re-engage people who are having trouble, unlike an in-person program with a specific end date.

Although PDAs have mostly fallen out of fashion, the researchers said smart phones can serve the same purpose as the devices used in the study. Spring said most weight-loss apps on the market haven’t been scientifically tested but may still help people drop extra pounds.

However, Rao added, there’s evidence that apps alone don’t have much of an impact on weight loss. It may be more helpful to think of the technology as something that augments help from a primary care doctor or nutritionist, he said.

Spring agreed.

“An app and some human support, coaching, nutrition education – that combination of things will help,” she told Reuters Health.

“The most important thing is to use the app for decision support and keeping track, but also to get the social support.”

SOURCE: http://bit.ly/Rfk14F Archives of Internal Medicine, online December 10, 2012.

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Lawyer says Goldman failed speech software “geniuses”

BOSTON (Reuters) – Goldman Sachs bankers failed to raise red flags about Lernout & Hauspie‘s accounting irregularities more than a decade ago, costing speech recognition software pioneers at Dragon Systems nearly all of their life’s work and about $ 600 million, a lawyer told a jury on Monday in federal court.

“They were relying on Goldman to take care of them and whether or not they should be worried about these questions,” plaintiffs’ lawyer Alan Cotler said in his opening statement.

He kicked off what is expected to be a two-month courtroom battle in U.S. District Court in Boston.

The trial pits Janet and James Baker, a suburban Boston husband-and-wife team that launched Dragon from the living room of their home with $ 30,000, against Goldman Sachs, the iconic Wall Street bank whose reputation has been tarnished in more recent years on allegations it has treated some clients shabbily.

In the case brought by the Bakers, Goldman Sachs Group Inc denies civil claims that include gross negligence and breach of fiduciary duty. Opening statements from Goldman’s legal team could come later on Monday or early Tuesday when the trial resumes.

In 2000, just months after Belgium-based Lernout & Hauspie acquired Dragon for $ 580 million in an all-stock deal, the company collapsed in an accounting scandal that sent it reeling into bankruptcy.

The Bakers owned 51 percent of Dragon, but only sold a few million dollars worth of their stock because of restrictions, Cotler told a jury. He added that the couple later received a $ 70 million settlement from a group of companies that advised Lernout & Hauspie in the transaction with Dragon.

The Bakers and two other early Dragon employees are seeking at least several hundred million dollars in damages.

In 1999, Dragon Systems hired Goldman as its financial adviser. The company, started in 1982 in West Newton, Massachusetts, was struggling and Lernout & Hauspie emerged as a buyer when another suitor decided not to pursue a deal, according to Goldman’s defense in the case.

Cotler said a team of four Goldman bankers, led by Richard Wayner, gave favorable and positive advice about Lernout & Hauspie in the weeks before the deal closed. Goldman was about to earn $ 5 million for its work, court papers show.

Goldman’s team, however, had concerns about L&H’s exponential revenue growth in Asia. Cotler said Goldman did not even take one of most preliminary steps in vetting L&H’s revenue claims — contacting L&H customers in Asia.

In fact, the Goldman team internally was not satisfied with the answers it was getting from L&H on deal-critical red flag issues, particularly the company’s Asia revenue growth, Cotler said.

Still, during a conference call with Goldman’s Lernout & Hauspie expert in London, further positive assurances were given to Dragon’s leadership, Cotler said.

Only years later did the Goldman analyst from that call admit he wasn’t aware of the extent of Lernout & Hauspie’s Asian revenue growth. Had he known, he would have been skeptical, Cotler said.

“These were salt of the earth people who are geniuses at what they do,” Cotler said, describing the key figures at Dragon. But the world of Wall Street and high finance was unfamiliar terrain for them. It was the reason why they put their faith in Goldman, the best and biggest investment bank in the world, he added.

(Reporting By Tim McLaughlin; Editing by Nick Zieminski)

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