Autonomy pulled wool over Brit finance panel's eyes, US court told

Trial of ex-CFO Sushovan Hussein continues

Software outfit Autonomy lied to a British financial regulatory panel, an American court has been told by the panel's former chairman.

The one-time head of the Financial Reporting Review Panel (FRRP), David Lindsell, told the US District Court of Northern California, sitting in San Francisco, that Autonomy had misled the panel following a complaint made by a former Autonomy worker about dodgy accounting.

Lindsell's comments were made as part of the trial of former Autonomy chief financial officer Sushovan Hussain on charges of committing wire fraud and securities fraud. Hussain has pleaded not guilty to the charges. Autonomy was sold to Hewlett Packard for $11bn in August 2011, with HP (as was, now known as HP Enterprise) writing down Autonomy's book value by a record-breaking $8bn months later in November that year.

The FRRP "investigates departures from the accounting requirements of the Companies Acts and is empowered to take legal action to remedy any such departures," according to the Oxford Reference Dictionary. It takes a close look at large companies' accounts if complaints are made to it; its members are senior people from the accounting and audit worlds.

In February 2011 the FRRP asked Autonomy to respond to the complaint, which alleged that an Autonomy subsidiary was $16m in debt and had "significant" outstanding receivables, according to American legal newswire Law360. Autonomy, it reported from the trial, was said to be in the habit of accounting for projected revenues from its resellers even when those resellers had not yet landed deals with end-users.

Lindsell said Autonomy told the FRRP that the former worker who tipped off the panel about possible accounting irregularities had committed payroll fraud, which apparently satisfied the FRRP that he was an unreliable source. Autonomy also assured the panel that its accounts were quite all right, and so the FRRP did not pursue the complaint further.

One of the resellers whose projected revenues found its way onto Autonomy's books, the court heard and as El Reg reported, was a firm called Microtechnologies LLC. They were said to be negotiating a deal with the Vatican to digitise the home of Catholicism's archives. The deal fell through.

"It definitely would have been relevant," Lindsell said, when asked whether that deal and its collapse would have been something the FRRP took into account when handling the tip-off. "It would have had to be a different answer than the one we were given."

"HPE is pleased that Hussain is finally facing a jury trial for his actions and we look forward to seeing him held accountable for his alleged role in defrauding HP," the company told The Register.

Hussein's trial, which is being heard by a jury, continues. ®




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