HP-Autonomy Fraud Trial Begins In US

The accountancy fraud trial against the former Autonomy Chief Financial Officer Sushovan Hussain has begun this week in a San Francisco courtroom.

The case stems from Hewlett-Packard’s disastrous $11 billion (£8.7bn) acquisition of British software firm Autonomy in 2011, which resulted in bitter mud slinging after HP filed an $8.8bn writedown of Autonomy in 2012.

Indeed, HP’s CEO Meg Whitman and Autonomy’s co-founder Mike Lynch repeatedly clashed in public after she accused the British management team of ‘accounting improprieties.’

Trial Background

Lynch for his part has always denied HP’s charges, and said that HP was aware of its sales and accounting practices, and blamed HP’s poor management of the acquisition.

The British Serious Fraud Office (SFO) closed its investigation into the sale of Autonomy to HP in 2011, claiming there was “insufficient evidence” for a realistic prospect of conviction.

However, the US authorities were also conducting their own investigation and in the end felt they had enough to charge Hussain.

In November 2016, Hussain was indicted on criminal charges including conspiracy and wire fraud. He has pleaded not guilty to 14 counts of wire fraud, one count of conspiracy to commit wire fraud, and one count of securities fraud.

The US Department of Justice also accused Hussain, who is a British citizen, of “intimidating, pressuring, and paying off” those who questioned his company’s financial practices.

If found guilty, Hussain could serve up to 20 years in prison and be liable for a multi-million dollar sanction.

Book Cooking?

There is little doubt that Hewlett-Packard’s $11bn (£8.7bn) acquisition of Autonomy was expensive. Indeed, it reflected a 64 percent premium to Autonomy’s share price.

HP have alleged that Hussain cooked Autonomy’s books to arrive at the software company’s valuation.

The trial will likely see potential witnesses include Leo Apotheker, the former HP CEO who backed the deal, and British accountants at Deloitte (Autonomy’s auditor).

The trial will also see the appearance of Autonomy’s former head of US sales, Christopher Egan.

It should be noted that Egan has agreed to co-operate with federal prosecutors, despite the fact that he has reportedly already admitted to fraud.

However Egan isn’t being charged as part of a cooperation agreement with US prosecutors.

The case in the San Francisco courtroom will be closely examined in the UK, as HP’s $5bn civil suit against Hussain and Mike Lynch is set to go to trial next year.

Lynch is also suing HP over the matter.

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