HP Wins Case Against Former Autonomy CFO

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

First blood to tech giant HP, in what will likely be a lengthy legal battle in courtrooms on both sides of Atlantic

The legal tussle between HP and British software firm Autonomy has seen the American tech firm draw first blood, after Autonomy’s former chief financial officer Sushovan Hussain was found guilty of artificially inflating the firm’s financial position before it was sold.

Hussain intends to appeal in what has been a toxic atmosphere even since Hewlett-Packard’s disastrous $11 billion (£8.7bn) acquisition of British software firm Autonomy in 2011.

The acquisition resulted in bitter mud slinging after HP filed an $8.8bn writedown of Autonomy in 2012.

hp

Guilty As Charged

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.

HP has always contended that ever since 2009 Hussain (who is a British citizen) allegedly masterminded an elaborate scheme intended to deceive investors, analysts, regulators and auditors, and to attract potential buyers such as HP.

HP had always pledged to go after Sushovan Hussain as far back as 2014.

In November 2016 US federal prosecutors indicted Hussain on criminal charges including conspiracy and wire fraud.

His trial began in February this year after the US Department of Justice accused Hussain of “intimidating, pressuring, and paying off” those who questioned his company’s financial practices.

And now in a San Francisco courtroom Hussain has been found guilty of artificially inflating the firm’s financial position before it was sold.

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

Pleased HP

HP said it was pleased at the verdict.

“As we have consistently maintained, Mr Hussain engaged in outright fraud and deliberately misled the market about non-existent sales through a series of calculated sham transactions,” it was quoted as saying by the BBC.

“Autonomy manipulated their revenue, and quarterly results, making an accurate valuation impossible,” it alleged. “That Mr Hussain attempted to depict the fraud as nothing more than a misunderstanding of international accounting rules was, and still remains, patently ridiculous – and the jury has now held him accountable for his role in defrauding HP.”

However the verdict is not likely to the last we hear of this case, 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.

“Mr Hussain defrauded no one and acted at all times with the highest standards of honesty, integrity and competence,” said Hussain’s lawyer, John Keker.

“It is a shame that the United States Department of Justice lent its support to HP’s campaign to blame others for its own catastrophic failings.”

HP deal

The acquisition, the largest-ever buyout of a European technology firm, was intended to spearhead HP’s move into software, but instead HP a year later wrote off three-quarters of what it had paid. In September 2016 HPE sold its software business, including the Autonomy operation, to British IT firm Micro Focus for only $8.8 billion (£7bn).

In April 2015 HP sued Hussain and Autonomy co-founder Mike Lynch for $5.1 billion in London’s High Court of Justice, making similar claims of fraud, in a case believed to be the largest-ever civil prosecution of British nationals.

On this side of the Atlantic, the Serious Fraud Office (SFO) in Britain closed its investigation into the sale of Autonomy to HP in 2011, claiming there was ‘insufficient evidence’ for a realistic prospect of conviction.

Lynch countersued HP for $160m in 2015, saying at the time the company had ruined his reputation and that it was “incompetent in its operation of Autonomy”, leading to the acquisition’s failure.

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