Reputations 'trashed' and accusations made in Autonomy fraud trial
During her testimony at an ongoing civil trial in the United Kingdom over allegations of accounting fraud at tech company Autonomy, former Hewlett-Packard Co. head Meg Whitman was accused of "trashing" the reputation of Autonomy founder Mike Lynch without knowing whether fraud had been committed at the firm.
Robert Miles, a lawyer for Lynch, clashed with Whitman on the second day of her testimony at the $5.1 billion trial, with her response drawing a rare intervention from the judge. The exchange turned on why HP, which had acquired Autonomy for $11 billion in 2011, hadn’t questioned Lynch after uncovering issues with Autonomy’s financial accounting.
“I don’t know why we would ask a fraudster why he had committed fraud,” Whitman said. “We had been a victim of significant fraud.”
"No, you had an allegation of fraud," replied Miles, who accused her of “trashing” the reputations of Autonomy managers. "And it’s nothing more than that and you know it."
"Well, I don’t believe that’s the case," Whitman said. "We knew exactly what had gone on here."
At this, Judge Robert Hildyard intervened.
"Then I wouldn’t have anything to do, would I?” the judge said. “Things have to be proven.”
At the midway point of the civil trial against Lynch and Sushovan Hussain, Autonomy’s former finance chief, both sides are drilling down into how HP calculated the alleged fraud at Autonomy — and how the company sought to pin the blame on Autonomy executives. The U.S. computing giant argues it was conned into overpaying for the British software firm and had to take an $8.8 billion writedown of the business just a year after the acquisition.
Last month in San Francisco, Hussain was given a five-year prison sentence for accounting fraud.
In one email, an HP executive told chief financial officer Cathie Lesjak that the company had "never formally prepared anything" to include the accounting "improprieties" in the total impairment.
"If you take it at face value and nothing else occurred, I would say that doesn’t seem quite right,” Whitman said.
Whitman, who took over at HP just as the Autonomy deal was completed, said Lynch repeatedly complained about trivial matters.
“I needed him to understand what it was like to work in a big company," she said. "It can’t be a free-flowing, wild startup. You’re now in a big company and you have to act the part."
Lynch was fired before the alleged fraud was uncovered and after his firm missed estimates for a second time under HP. It was, Whitman said, "one of the biggest misses of my career."
Miles argued that Whitman oversaw a sprawling company with business units that failed to coordinate with each other and didn’t work effectively with Autonomy’s sales team. Throughout the day he repeatedly tried to cut off the one-time candidate for governor of California.
"Can you please stop making speeches," he said. "You may have done it at other times during your career."