Former Autonomy CFO Accuses HP of Cover-Up in Autonomy Deal
The former CFO of Autonomy today accused Hewlett-Packard of trying to cover up details of its own mismanagement after its acquisition of the British software firm in 2011 proved a failure.
In a new filing with a U.S. federal court in California, Sushovan Hussain said HP has sought to avoid disclosing evidence of “gross mismanagement” and “fraudulent conduct” by blaming most of an $8.8 billion write-down on alleged accounting improprieties by Autonomy’s founders and settling lawsuits that would force that evidence into the open.
Hussain is seeking to block the proposed settlement of a series of lawsuits against HP by shareholders seeking damages and the disclosure of records pertaining to the deal, now acknowledged as the most disastrous acquisition by HP in its 75-year history. Had the cases gone to trial, Hussain argues, HP would have been forced to disclose numerous details about its management of Autonomy after the acquisition closed, details it would rather keep hidden.
“HP has engaged in a vigorous game of Whack-A-Mole, batting at various investor lawsuits that pose the threat of discovery and disclosure of HP’s own mismanagement,” the filing reads. “HP’s successes in squelching disclosure at every turn present a textbook example of defensive stalling, redirection, avoidance, and ultimate prevention of disclosure.”
In an emailed statement, an HP spokeswoman called Hussain’s claims “preposterous.” Here it is in full:
“The bottom line is that Sushovan Hussain’s interests and those of HP and our shareholders are diametrically opposed. It’s preposterous for him to complain about HP and our shareholders joining forces and holding him accountable for the massive fraud that both believe he perpetrated upon the company. If Hussain is truly interested in clearing his name, he should welcome the coming suit.”
Hussain is seeking 200 documents totaling 2,668 pages relating to the acquisition that have been turned over to a court in Delaware in other shareholder lawsuits, but which remain under seal. The documents are described in the filing as including evidence that HP had sought to unwind the Autonomy deal, and records from an internal investigation that found alleged accounting improprieties.
“After incompetently mismanaging Autonomy for over a year … HP announced to the market a number of serious accusations of impropriety,” the filing goes on. “Since that day HP has been actively engaged in a cover-up of its mismanagement and the events leading up to the announcement.”
Hussain is represented by John Keker, a high-powered San Francisco lawyer whose past clients include Silicon Valley investment banker Frank Quattrone, cyclist Lance Armstrong and Major League Baseball.
HP acquired Autonomy as part of an attempt led by then-CEO Léo Apotheker, a former CEO of the German software firm SAP, to transform it into a company focused primarily on enterprise software. The deal was the linchpin of a now-abandoned strategy that included a plan to sell off HP’s personal-computer division. Apotheker was fired by HP’s board in September of 2011, which then named Meg Whitman, then an HP director, as its CEO.
Since 2012, HP has said it overpaid for Autonomy by about $5 billion, and in November of 2012 took an $8.8 billion write-down. It has accused former Autonomy executives, including Hussain and its former CEO Mike Lynch, that they over-inflated their company’s value by engaging in accounting fraud. It has referred its findings to regulatory agencies in both the U.S. and U.K., and criminal investigations are said to be ongoing. Hussain and Lynch have argued publicly they did nothing wrong, and that as a British company, Autonomy operated under different accounting standards than U.S. companies.
Here’s the full filing.