Judge puts the $5bn question to HPE: Who else apart from Lynch and Hussain were in on this alleged fraud? If Autonomy's accounts were fraudulent, an awful lot of people must have been part of the scam, its former CFO Sushovan Hussain's barrister told the High Court in London yesterday. I just got here – what's it all about? In 2011, HP bought Autonomy – a maker of software to keep track of unstructured data, founded by Mike Lynch …
His Honor smells a rat, a very good point is in a company the size of Autonomy more than 2 people would be involved. Even those others involved were only carrying out orders they would know the details. And more than likely many would actually be involved in a fraud. Too many people would be handling the data for someone not to notice.
HPE is about to get a whole lot of dirty laundry aired. They aren't getting that 5 billion. If they were smart they would settle because if the purpose of this was to absolve themselves of blame its about to blow up in their face big time. I imagine share holder lawyers are the ones buying the popcorn now.
HPE is about to get a whole lot of dirty laundry aired.
It's not quite that simple. That was then, this is now. In the meantime, HPE was sold on to Micro Focus, whose management had no part in the Autonomy acquisition.
Whatever dirty laundry is aired, its connection to present-day entities may be less than clear.
Presumably, when HP/HPE acquired Autonomy, they also acquired all the company records, including documents and emails?
So you'd think that answering the judge's question about who else was involved would be a slam dunk, as all the evidence would be there?
However it seems to be quite a difficult question to answer.
If only HPE's lawyers had access to some sort of enterprise software that specialises in the analysis of large volumes of unstructured data such as emails and documents then their task would be much easier.
"Presumably, when HP/HPE acquired Autonomy, they also acquired all the company records, including documents and emails?"
HP went one better - they appear to have acquired a fraudster who turned snitch and has dumped his former bosses in it while walking away untouched.
If the company records show that everyone was in on it, then HP may have a chance. If it was all "verbal", I wonder if HP's inside informant will have to appear. That would be interesting.
I was expecting this to be a slow burner - there's been more fun and games in the first week than in almost the entire history of IT court cases. Please don't stop giving :)
I am assuming that HP did some due diligence, check the books etc.? If it looked shifty, then HP should have walked away, but they didnt. Now HP overpaid, then wrote it off and then blames everyone else except themselves for this titanic cockup. A 79% premium over Autonomy's closing share price, wow. There was some financial reporting issues in 2009, which would have made any sensible person go "hmm, lets take a closer look at this" or walk away, but no and plowed on regardless. The SFO looked into any impropriety from the sale and said that theres little or no chance of prosecution and thats been closed. So HP has done this entirely by itself. The writedown of Autonomy apparently only covers $200m, not the full $8.8b, so that should be looked into. I hope that shareholders go to town on HP.
A reference for others: https://www.theguardian.com/business/2019/mar/28/hewlett-packard-six-hours-of-due-diligence-on-autonomy-court-told
"HP carried out only a brief period of due diligence to use the Autonomy purchase as a “counterpoint to various bits of bad news that HP was expected to publish” on the same day the deal was announced"
"The defence’s submission said: “While KPMG had been contracted to provide a number of services in relation to the due diligence, HP’s tight timetable meant that by this point they had not carried out all of the tasks which they had been engaged to carry out. HP nevertheless decided to go ahead.”"
That would explain why KPMG hasn't been targetted by HP.
Why on earth should this take a year to sort out?**
The single issue is, did Autonomy make fraudulent accounting entries in their published accounts.
All the Judge needs to ask is "which are the fraudulent accounting transactions, carried out by whom, under the direct instruction/authority of whom." (tbf he'd probably use much better grammar than i.)
Which is something that could easily, and really ought to be determined outside the courtroom, by a technical department, probably forensic accountants or independent auditors, appointed by the Court. Use the Court hearing to go through the final report on this.
IIRC didn't the SFO pretty much do that and conclude that there was no cause to even consider a prosecution? Or similar.
** a cynic would suggest that with X barristers and Y solicitors on each side, paid on a time basis, it'll stay as it is, thank you very much m'lord.
Edit : What the new Court system IT really needs first up is a fact checker.
With hindsight, we can of course laugh at HP's idiocy.
But Reg commentards do better than that. We were laughing at this deal before it even happened. And of course many times since.
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