Former exec says HP 'bungled' the Autonomy acquisition, alleges cover-up
Autonomy’s former chief financial officer has claimed that Hewlett-Packard is accusing him and other ex-employees of fraud in order to cover up its own failings in the disastrous 2011 acquisition.
After buying Autonomy, HP took a US$8.8 billion writedown on the $11.1 billion deal, citing widespread accounting improprieties at the company before the sale.
It parted ways with Autonomy founder Mike Lynch as well as ex-CFO Sushovan Hussain. The latter filed a motion in June opposing a settlement HP reached with shareholders over the matter, arguing that if it isn’t stopped, the truth about what happened with Autonomy will be lost.
In a court filing last week, HP called Hussain’s motion “ludicrous,” calling him “one of the chief architects of the massive fraud on HP that precipitated this litigation.” HP also revealed that it plans to sue Hussain in the U.K., where Autonomy is based.
“HP’s opposition swells with bile, but its sound and fury signify nothing,” Hussain said in a new response to HP filed on Tuesday. If upheld, the shareholder settlement would conceal the truth, namely that “HP’s bungled integration diminished Autonomy’s value,” it adds.
HP bought Autonomy “knowing it was paying a premium, and knowing that its CFO objected that the price was too high,” the filing states. “HP also knew about accounting issues raised for years by analysts, and it knew that the integration of the companies would present accounting challenges, including moving from European IFRS standards to GAAP.”
But HP, then led by CEO Leo Apotheker, decided to complete the deal because it wanted to “take HP in a completely new direction,” according to Hussain. After Apotheker was forced out as CEO and replaced with Meg Whitman, the integration of Autonomy “failed miserably” as the new guard lacked enthusiasm and vision, the filing adds.
“Hoped-for synergies turned into conflicts and redundancies,” it states. “Sales incentives were mismatched and unproductive. Unhappy employees fled. Apotheker’s vision for the acquisition went from dream to disaster.”
HP ultimately took the writedown, “characterizing accounting disputes as ‘fraud,’” the filing adds.
Since then, 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 states, in reference to the carnival game where a player strikes mole dolls with a club as they pop up at random in holes.
An HP spokesperson dismissed Hussain’s filing in an emailed statement: “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.”