Lernout & Hauspie Speech Products filed Chapter 11 bankruptcy papers Wednesday after discovering previous financial irregularities.

The company is the parent company of Dictaphone and of Mac-friendly software developer, Dragon Systems.

Lanny Davis, legal counsel for L&H and an attorney with law firm Patton Boggs, said the current heads of the software vendor discovered a number of financial irregularities in recent weeks that propelled them to make the decision.

Missing money "They recently uncovered numerous examples of financial misreporting and other questionable financial transactions," Davis said. "Upon discovering this, they reached the conclusion that the only hope for the company was to seek protection from creditors and legal claimants and most importantly to clean up the mess they inherited."

L&H CEO John Duerden along with company chairman Roel Pieper, discovered that substantial sums of money were missing from the vendor's South Korean bank account, according to L&H. In addition, L&H officials are now looking into questionable financial reporting from dealings with the company's customers in Singapore, Belgium and elsewhere.

"The prior management could not explain where that money was," Davis said.

In recent months, there has been plenty of upheaval among L&H's senior management team. Duerden only became company CEO in August, with Pieper, previously L&H vice chairman, becoming chairman of the board earlier this month. At that time, L&H cofounders Jo Lernout and Pol Hauspie stepped down from their positions as co-chairmen and managing directors.

It appears that Lernout's and Hauspie's removal from leadership was a response to the financial ambiguities discovered by Duerden and Pieper.

"We believe, if we can resolve these problems and restore a culture of integrity and transparency to the company, that there are enormous assets here," Davis said.