back to article Mad Leo tried to sack me over Autonomy, says top HP Inc beancounter

Hewlett Packard's chief beancounter, Catherine Lesjak, was at "war" with former CEO Leo Apotheker, who tried to fire her immediately before he himself was defenestrated, a US court has heard. During the trial of former Autonomy CFO Sushovan Hussain on an assortment of fraud charges in the US District Court of Northern …

  1. RobertLongshaft

    Massive kudos for the use of the word defenestrated!

  2. John Smith 19 Gold badge
    Unhappy

    Sounds liek the lawyer is trying to muddy the waters.

    At heart it comes down to wheather the Autonomy CFO falsified the accounts?

    If he did, he's guilty.

    But if he reported the facts correctly (albeit using non standard practices of the "how we measured this is defined in footnote 362 on page 16 of Appendix 2e in 4pt type, in case you're interested" variety) and it was HP's accountancy team's job to catch him out perform due diligence, in which case it's HP's former management who the sharholders should be chasing for their $Bn's.

    And TBH the CEO cut the CFO of HP out of an $11Bn acquisition? Did he not think the numbers ought to be checked really carefully for a deal that size, because, y'know, bigness?

    1. Anonymous Coward
      Anonymous Coward

      Re: Sounds liek the lawyer is trying to muddy the waters.

      Due diligence is quite normal and I have been part of such things in very specialised fields. Definitions in footnote 362 is the norm, we just follow this through. It is a hard and tedious slog but it is expected to be so.

      If there is something fishy the accountants or auditors are supposed to raise flags. Firing accountants during such a process raises another set of very red flags.

      1. BebopWeBop Silver badge

        Re: Sounds liek the lawyer is trying to muddy the waters.

        Quite. I have been asked to provide some services assessing somewhat smaller mergers/purchases and the process has alway been carried out by impressively serious, sober individuals with a fine eye for detail.

        1. Anonymous Coward
          Anonymous Coward

          Re: Sounds liek the lawyer is trying to muddy the waters.

          Years ago I was part of a small team that was tasked to perform a technical assessment prior to buying a company because of its main product, an accounting software for Windows. They had only an AS/400 solution, and wanted a Windows one, and didn't want to invest in developing one.

          We reported that software was badly written (VMS developers forced to become Visual Basic ones without proper training), already obsolete, and other variety of issues. Our report was DON'T BUY!!!!

          Of course the C-suites didn't listen to us, because they wanted the company customers, and planned to get more.

          I was left go some months after.

          All the company got after the buy was the complains and some lawsuits many customers had against the company because of the product - someone else didn't make his due diligence.

          They went bankrupt a couple of years later - having less deep pockets than HP. It was still about one thousand people looking for new jobs, anyway.

      2. John Smith 19 Gold badge
        Unhappy

        "If there is something fishy the accountants or auditors are supposed to raise flags. "

        Another interesting question.

        Did they? If they didn't they don't sound very good at their job.

        OTOH if they said "Some of this looks very dubious. We can't confirm more than 10% of these transactions as real" and the CEO said "What do you know? This deal is happening. It's the crowning glory of my career in huge deals" that would be a rather different story.

        I wonder what the audit trail between HP and it's appointed auditors (I'll bet they are one of the Big Five) would say.

      3. ecofeco Silver badge

        Re: Sounds liek the lawyer is trying to muddy the waters.

        Firing accountants during such a process raises another set of very red flags.

        It sure as hell does.

    2. a_yank_lurker Silver badge

      Re: Sounds liek the lawyer is trying to muddy the waters.

      Cutting the CFO out of the deliberations smells either of incompetence and being on the take. I can believe either one.

      1. PeteA

        Re: Sounds liek the lawyer is trying to muddy the waters.

        Are incompetence and being on the take exclusive conditions?

  3. Peter2 Silver badge

    So, HP's accountant opposed the buyout because she thought (correctly as it would turn out) that Autonomy was overpriced. Management then told her she was fired in response in a stellar example of mature consideration of the pros and cons of the issue by senior management, who after all are employed to do nothing other than consider these points.

    One suspects that the correct person to sue might actually be an incompetent ex CEO, or the board for not providing effective oversight.

    But if HP is able to sue the Autonomy CFO for making out that the business was more valuable than it was, could we then sue salesdroids who indicate that their products are more valuable than they actually are should we later buy them on the basis of the information they provide on the basis of the precedent?

    1. SisterClamp
      IT Angle

      Good point @Peter2. Turning it around in blackly humorous fashion, I had the Head of Foundation at *koff koff* &eading *koff koff* University tell me that the course requirements on their website (sans an official handbook) are "for marketing purposes only" and not to be taken literally! (Still have the email.) So there. Wish I could sue for that one.

      1. Michael Wojcik Silver badge

        the course requirements on their website (sans an official handbook) are "for marketing purposes only" and not to be taken literally!

        Well, yes, obviously. What's the problem?

        At every academic department I've been associated with, the requirements in the Student Handbook are canonical. That's what the Handbook is for; it delineates the terms of a contract between the department and students attending its programs.

        If there's a discrepancy between the Handbook and the website, the website loses.1

        One hopes there's a sincere effort to keep the website accurate, and that the descriptions there can be used as a fairly reliable reference, and not just "marketing". But they shouldn't be considered definitive.

        1A stickier situation is a discrepancy between the Handbook and the department bylaws or requirements imposed by its controlling unit (typically a college, in the US university system). In that case it becomes a matter of interpretation - is one or the other clearly the result of error? were the bylaws amended too recently for the Handbook to be brought up to date (in which case usually the changes only apply to newly admitted students)? - and possibly arbitration by the Ombudsman's office or similar.

  4. Anonymous Coward
    Anonymous Coward

    As the old saying goes..

    A fool and there money are soon parted.

    1. Aladdin Sane Silver badge
      Headmaster

      Re: As the old saying goes..

      *their

      1. Fungus Bob Silver badge
        Trollface

        Re: As the old saying goes..

        Well, the money *was* there and now it's gone!

    2. Androgynous Cow Herd

      Re: As the old saying goes..

      you mean:

      " a fool and their money are some party"

  5. TonyJ Silver badge

    So...the CFO was against it as it was massively overvalued. The Chairman was not sold it was a good idea. The CEO brushed both of their concerns aside and paid over the odds anyway, without, seemingly having due diligence performed.

    OK then.

    1. BebopWeBop Silver badge
      Meh

      About par for the course with the modern HP.

    2. Inspector71

      the CEO of HP, demonstrating incompetence, I can't believe that......

      1. LDS Silver badge

        CEO of HP, demonstrating incompetence

        You know it got a nice payoff because, poor lad, after those big mistakes he wouldn't have had any longer a chance to become the CEO in another company?

        Not only incompetence, but also rewarded. That's how the rarefied world of CEOs work...

        Still, he's in several boards - having burned 8.8 billions is not an issue, after all...

        1. asdf Silver badge

          Re: CEO of HP, demonstrating incompetence

          Whenever I picture an HP board meeting I can't help but hear Yakety Sax playing in the background.

    3. Anonymous Coward
      Anonymous Coward

      Ray Lane is a revisionist. Among other things ....

  6. J J Carter Silver badge
    Thumb Down

    Face facts

    No Briton or British Company will ever get a fair trial in the USA.

    1. Woodnag

      Re: Face facts

      Americans have a tough time too in court. American companies, however, settle out of court for a small fine and no admission of guilt.

    2. asdf Silver badge

      Re: Face facts

      Autonomy is probably not the company you want to highlight to make that point though to be honest. They did not represent what is good about British software companies.

    3. Anonymous Coward
      Anonymous Coward

      Re: Face facts

      >No Briton or British Company will ever get a fair trial in the USA.

      True. One of my client got a particularly ugly hatchet job done on their case which resulted in the US market being handed over to a US company at the expense of a non-US company. Violations of signed agreements were of course not a problem. Legal certainty flew out of the window. I am still rather disturbed by the whole thing, the wild west still lives on in the US. People make fun of Trump in White House but the attitude towards the world outside the US has been there for decades.

  7. HurdImpropriety

    Oh Look... HP CEOs fail at failing, then get huge bonuses

    There were emails going around at HP about how bad the deal was. Not to mention the "other deal" that was horrific.... the acquisition of Palm/WebOS for 1.3 Billion dollars. Yup, fail fail fail and get paid paid paid as a CEO. Meg sucked too so did Hurd.

    Meg fired Leo siting the stupid deals and ALSO the attempted first breaking up of HP into two crappy pieces. Meg thought it was a bad idea then. Then of course ended up doing just that.

    Many bad business executions and of course millions in Exec bonuses. Sometimes I think working at HP was like working for the government.

    1. Anonymous Coward
      Anonymous Coward

      Re: Oh Look... HP CEOs fail at failing, then get huge bonuses

      You actually hit the nail on the head. I joined Compaq and ended up post-merger at HP. HP was just like the government, or more specifically the civil service. Whereas at Compaq you were judged on your contribution, at HP you were judged by the number of people working for you. No senior, expert, single contributors were allowed at HP. You had to manage people to qualify for bonuses and stock options. No-one was allowed to escalate anything, In contrast I had escalated five issues to various Compaq CEOs in my time. (Canion made a point of this in the documentary about Compaq.) At HP, not once.

      1. BebopWeBop Silver badge

        Re: Oh Look... HP CEOs fail at failing, then get huge bonuses

        Rubbish. I was working at HP when the Compaq deal went through (actually the ONLY delighfulful thing about it was getting part of Digital). Individual contributors, of whom I was one, were well rewarded at the time and it was a fun place to work. Compaq and later EDS is where the rot set in.

        1. ecofeco Silver badge

          Re: Oh Look... HP CEOs fail at failing, then get huge bonuses

          I believe that's what he said.

  8. The Nazz Silver badge

    An utter farce

    Was it established that "chief beancounter" Lesjak thought Autonomy was overvalued because

    1) the Autonomy accounts were 100% legit and the OFFERED price was too high , or

    2) the OFFERED price was too high only because the Autonomy accounts were fraudulently overstated

    I have zero knowledge of Autonomy or their financials prior to this case but there is something i just don't understand.

    The alleged fraud in Autonomy's accounts is said to be booking future years sales, revenue, in the current years accounts, thereby inflating profits and the company's valuation.

    But one of the more valuable reports of a large company is the Cash Flow Statement ( and reconciliation).

    Surely, it's a very simple matter for any auditor to check whether claimed "revenue" from customer X has been recorded in the cash/bank statements? Or, if as likely in Debtors, then sample a few invoices to see if all is well.

    Ah but, you may say, auditors believe everything they are told. Like hell they do or should.

    "Well, Mr/Ms Auditor, we have had a good year, an exceptional year. We have sold 1m units to customer X for a grand total of £500m."

    Auditor : "Yes, i see, i've seen the invoices billed to customer X"

    "See i told you we had a good year"

    Auditor : "But the problem is, i see only work done on 10k units at a value of £1m"

    UK VAT law. :

    Doesn't VAT law require a specific "Tax date" dependent on certain factors one of which is the actual supply of goods..

    If Autonomy did bill customer X for next years transactions then surely that VAT invoice is invalid and unlawful?

  9. EveryTime Silver badge

    The is little doubt the books were cooked.

    That's what this trial is about.

    The gross incompetence of HP's management is unquestioned. Say what you will about Larry Ellison's business approach, he knew the industry. You don't need to look at the ledger entries and sales pipeline to estimate a company's value. He scoffed at the absurd price when the deal was announced.

    But again, pompous HP management isn't the issue. It's if the books were cooked. Deflecting by say "we lied, but the deal would still have happened if we hadn't cheated" isn't really a defense.

    1. JimJimmyJimson

      It kind of is.

      Fraud typically requires a deception that another party relies on. If the deal was going to be done irrespective of the deception then thats not fraud - there is no reliance.

  10. sanmigueelbeer Silver badge
    Trollface

    on the grounds that someone must have been cooking the books

    I think there was a mis-communication of instruction.

    Before the meeting, to explore whether to go ahead with the Autonomy buyout, Hussain was given instructions to "book the cook" with the restaurant so the chef can make a lavish feat to impress Autonomy.

    Instead he got the words mixed up.

  11. Barry Mahon

    Whilst I agree the Autonomy books were cooked, the reported shutdown of the cross examination illustrates how the US law protects it's own.

    1. Gordon 10 Silver badge
      Unhappy

      Unfortunately I suspect this case is relying on the difference between the Autonomy CFO being tried for Fraud vs the HP CEO being tried for Malfeasance (insert appropriate legal term here).

      Both can be true about the deal - but HP is only interested in pursuing 1 of them. Lets say hypothetically the CFO knowingly recognised $100m of revenue in a dodgy manner - thats still fraud, and leaves the HP management to blame for the the other 8.7Bn. But the CFO will be in the clink and they wont. At worst they have kicked the can on their just desserts for another few years. At best they have a jailed scapegoat and job done.

      I would imagine this whole case will rest on whether there is any provable fraud or not - HP incompetence is out of scope.

      1. John Smith 19 Gold badge
        Coat

        "HP incompetence is out of scope."

        Correct.

        So far.

        That can change.

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