Sunday 22 September 2019

Autonomy ex-CFO hit with fraud conviction

The judge threw out McDonagh’s claim which meant the six other claims collapsed with it and were dismissed
The judge threw out McDonagh’s claim which meant the six other claims collapsed with it and were dismissed

Joel Rosenblatt

The former chief financial officer of Autonomy has been found guilty of orchestrating an accounting fraud to arrive at the $10.3bn price Hewlett-Packard paid for the UK software maker more than six years ago.

On Monday, a jury voted to convict Sushovan Hussain on all 16 counts of wire and securities fraud after three days of deliberations in San Francisco's federal court.

The verdict will be seen as a boost to Hewlett-Packard as it heads toward a trial next year in London in a $5bn civil suit against Hussain and Autonomy's Tipperary-born co-founder and former CEO Mike Lynch.

John Keker, Hussain's lawyer, declined to comment.

Autonomy was the UK's second-largest software business when Hewlett-Packard acquired it in 2011. Hewlett-Packard later wrote down its value by $8.8bn, citing fraud by Autonomy and asking the US Justice Department to investigate.

The guilty verdict is a win for prosecutors, and at least partially vindicates Hewlett-Packard. "The jury verdict affirms that corporate criminals who cook their company's books to the detriment of victims in the United States, and specifically this district, will be held to account in our courts," acting US Attorney Alex Tse said in a statement. Hussain faces up to 25 years in prison for securities fraud, the most serious offense.

The US accused Hussain of spinning his company's financials to create a false appearance of growth. At trial the US government presented emails, phone records, earnings statements, press releases, and even an alleged payment of "hush money" to show what prosecutor Adam Reeves called "a balance sheet of fraud."

From 2009 to 2011, when most technology companies were struggling in the wake of the 2008 financial crisis, Hussain built a facade to "eke out consensus estimates" of Autonomy's revenue ahead of the merger with Hewlett-Packard, Reeves said in his closing argument.

Autonomy by late 2011 had become an "unsustainable Ponzi scheme", he said, leading Hussain to exhort Mr Lynch as CEO to sell the company.

Hussain's lawyer argued that HP bought, and then hobbled, an increasingly profitable software company - just one in a string of failed acquisitions, he said. (Bloomberg)

Irish Independent

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