Another day, another new twist in the HP/Autonomy debacle. It is now alleged that HP's Principal Accounting Officer sold HP shares to the value of US$1.1 million in February this year as the Autonomy acquisition started to look more and more like a pig in a poke but before that knowledge was made public. As a result the company now faces a class action lawsuit that could rip a swathe through HP's senior ranks. Martyn Warwick reports.
In the lawsuit, filed in the federal court in San Francisco, just up the road from the battered crenellations of Fort Palo Alto, HP shareholders accuse James Murrin, of “failing in his duty” by selling 42,500 company shares without warning investors about alleged difficulties and accounts discrepancies in regard to the Autonomy buyout. Mr. Murrin is a Senior Vice President and General Manager of HP having resigned as Principal Accounting Officer on May 1, this year.
Meanwhile, two law firms, Johnson & Weaver, LLP and Hagens Berman Sobol Shapiro LLP, that specialise in pursuing shareholder rights, have started a full-scale investigation into the actions of the HP board of directors in regard to breaches of fiduciary duty to the company itself and violation of federal securities laws in connection with the purchase of Autonomy.
The suit claims that “fraudulent” behaviour on the part of the HP board allowed Mr Murrin “to sell HP stock at artificially inflated prices." It adds, “The defendents knew that the adverse facts... had not been disclosed to and were being concealed from the public and that the positive representations being made were then materially false and misleading.”
There is an old saying that troubles come in threes and, just to pop a regurgitated cherry on the top of the shit sundae, another class action is being pursued by Robbins Geller Rudman & Dowd LLP on behalf of investors who bought into HP common stock between August 19, 2011 and November 20, 2012.
This one also refers to the contentious $13 billion HP purchase of EDS back in August 2008 and the $8.0 billion "goodwill impairment charge" HP took on that purchase in Q3, this year. The sharks are circling and they smell blood in the water.
For its part, HP has now referred Autonomy to the Enforcement Division of the US Securities and Exchange Commission (SEC) and to the UK's Serious Fraud Office.In both cases HP is demanding or civil and criminal investigation.
In somewhat vaguer terms the company also says it will "aggressively pursue" those it accuses of fraud and will sue "various parties" in civil courts.This sort of corporate sabre-rattling is redolent of King Lear's impotent treat that he "will do such things, what they are, yet I know not: but they shall be the terrors of the earth." And look what happened to him.
The most laughable and indeed pathetic part of HP's stance on Autonomy is that the UK company "persuaded HP to overpay for it". No it didn't. HP thought it saw an opportunity to make a big play in the "Big Data' market and it allowed greed to override common sense. Autonomy went through a full due diligence process and HP was so dazzled by perceived potential that it overpaid for it. End of. That's life. Get real.
The history of mergers and acquisitions in the global ICT industry is littered with the wreckage of what were once regarded as the greatest deals ever done. Anyone active in M&A in this sector should read a bit of history and come to the realisation that IT companies are rarely if ever worth the inflated sums that bewitched prospective purchasers might, in their short-term enchantment, believe they are.
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