HP, CEO Whitman to Face Shareholder Lawsuit Over Autonomy Deal
A federal judge rules shareholders, who have accused executives of misleading comments, raised enough issues to let the lawsuit go forward.Hewlett-Packard and CEO Meg Whitman will have to defend themselves in a class-action suit filed by investors who believe they were misled about the details around the company's troubled $11.3 billion acquisition of software vendor Autonomy in 2011. A U.S. District Court judge in San Francisco ruled Nov. 26 that there were enough legitimate issues raised in the lawsuit to let it proceed. However, Judge Charles Breyer did dismiss claims against former CEO Leo Apotheker, ex-Autonomy CEO Mike Lynch and several other Autonomy officials, arguing that there was not enough evidence presented in the lawsuit to support claims that they, too, misled investors. The investors in the $1 billion lawsuit claim that Whitman and other HP executives did not fully divulge the problems with the Autonomy acquisition, even when they knew HP would have to take an $8.8 billion charge in November 2012 over the troubled deal. For example, in comments she made in May and June 2012, Whitman never mentioned that at the time she was concerned about possible accounting problems at Autonomy. During a September 2012 conference call to discuss quarterly financial numbers, Whitman—who was on the company's board of directors when the Autonomy deal was first broached and was CEO when it closed—said the software vendor's value "approximated the carrying value," even though she and others knew it was very possible that HP had overpaid for Autonomy, the judge ruled.
However, Breyer also said the investors had not yet established "any coherent motive as to why defendants would knowingly purchase a company for several times its actual value or that they knew Autonomy's accounting was problematic."