In 2011 Hewlett Packard acquired the enterprise software firm Autonomy for $11 billion, though HP quickly became displeased with the deal when it realised that the company had deceived it by exaggerating its value.
This week, federal prosecutors have backed up HP's claims by indicting the former chief financial officer of Autonomy Sushovan Hussain on felony fraud charges. The indictment notes that Hussain, “together with others, engaged in a fraudulent scheme to deceive purchasers and sellers of Autonomy securities and HP about the true performance of Autonomy's business, its financial condition, and its prospects for growth.”
When it purchased Autonomy, HP believed that the acquisition would help it transform its business at a time when it was struggling with decreased PC hardware sales. Immediately after the deal was completed though, it faced heavy criticism from analysts that thought it had paid too much for the company.
A year after HP bought Autonomy, it was forced to write off $8.8 billion of Autonomy's value as over $5 billion was exaggerated as a result of false claims and financial reports made by the company. In order to increase its value, the software firm had not only issued false quarterly and annual reports but it had also paid off anyone who raised questions regarding its financial practices.
Federal prosecutors indicted Hussain in a US District Court in San Francisco this Thursday where he was charged with wire fraud as well as conspiracy to commit wire fraud. Together these charges carry a maximum prison sentence of 20 years and the federal government is also seeking $7.7 million gained through illegal activities from Hussain.
John Keker, Hussain's lawyer, has issued a statement in which he defended his clients' innocence, saying: “He defrauded no one and, as Autonomy's CFO, acted at all times with the highest standards of honesty, integrity and competence. It is a shame that the Department of Justisce is lending its support to HP's attempts to blame other for its own catastrophic failings. Mr. Hussain is a UK citizen who properly applied UK accounting rules for a UK company. This issue does not belong in a U.S. Criminal court.”
Although HP may finally be seeing justice for the wrongs committed against it by Autonomy, the company will never regain its $11 billion investment.
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