Judge puts the $5bn question to HPE: Who else apart from Lynch and Hussain were in on this alleged fraud?

Plus: Next week Mad Leo's on the stand

meg whitman and mike lynch (autonomy hp trial)

Autonomy Trial If Autonomy's accounts were fraudulent, an awful lot of people must have been part of the scam, its former CFO Sushovan Hussain's barrister told the High Court in London yesterday.

Sushovan Hussain is being sued in England by HP for $5bn along with the CEO of Autonomy at the time Meg Whitman's firm acquired it in 2011, Mike Lynch. Both deny any wrongdoing.

Paul Casey, Hussain's counsel, said Hussain was represented not "as an observer; he is here to defend his own position in respect of the claim against him".

He summarised HPE's allegations against his client by saying the former CFO is accused of telling Autonomy's sales team to "go out and find him willing counterparties to contrived VAR" [reseller] deals.

As the court heard earlier this week, HPE accuses Lynch and Hussain of falsely inflating Autonomy's revenues by entering into fake transactions where each side bought products of a similar value from each other at the same time. HPE says the commercial value of these deals was nil – but that the deals had allowed Autonomy to boast about bulging revenues that weren't actually true.

Casey added: "Most of the transactions which are impugned in these proceedings were managed not from Autonomy's headquarters in Cambridge or London, where Mr Hussain works, but from the headquarters of the US subsidiary of Autonomy based in San Francisco, largely through transactions arranged by Mr [Christopher] Egan."

Christopher Egan was Autonomy's US head of sales. As part of a plea deal with the American legal system, he paid the US government $923,000 to avoid prosecution and also agreed to be a witness against Lynch and Hussain in London's High Court. HPE has consistently denied, inside and outside the courtroom, that it has made any private deals with American government prosecutors.

As for Hussain allegedly fiddling Autonomy's accounts, Casey said:

HP's attempt to pin absolutely everything on the defendants for everything that ever happened is unrealistic for a company the size of Autonomy. It is simply impossible that the defendants could have carried out a fraud on this scale without the assistance of a huge number of employees of Autonomy... it would be very helpful to know, particularly before we start the evidence, who exactly is said to have been involved in the fraud apart from Dr Lynch and Mr Hussain.

He added: "It must be very rare that a fraudster gives both their own auditor and the intended victim of the fraud complete visibility into what it had been doing, allegedly dishonestly."

You're saying just two people committed this $5bn fraud, right?

The judge, Mr Justice Hildyard, then asked who else (apart from Lynch and Hussain) was implicated in the alleged fraud – much to the consternation of HPE's barrister.

"There was ... a refrain from Mr Miles and from Mr Casey relating to the definition of the universe of implicated persons," the judge told Laurence Rabinowitz QC, "and I should, I think, know whether a given witness is thought to be, from your point of view, a good'un or a wrong'un."

Rabinowitz spluttered: "Can I suggest the position is slightly more nuanced than that... I don't want to name names publicly now, but there will be witnesses who become implicated in particular conduct."

Mr Justice Hildyard pressed the point, leaning forward over the three screens in front of him on the bench to remark that "people in responsible positions" within Autonomy who "were able to make a difference" could have "identified" what was going on – and he added that it was up to HPE to make clear "that no one in the [Autonomy] audit committee was implicated and that no one at Deloitte was implicated [or] that they were victims or people who had been misled".

If HPE was going to argue that Lynch and Hussain were the only people to blame for fraudulently cooking Autonomy's books, the judge was saying, it also needed "to have been pretty clear who you say was part of that fraud".

Rather surprisingly, Rabinowitz asked the judge if he had read the "894-page opening", the gigantic legal document setting out HPE's arguments in exhaustive detail. His lordship quipped: "The problem with an 894-page opening is the prospect of a judge mastering that in what turned out to be a week rather than two veers between zero and zero!"

For comparison, Lynch's legal team handed the judge 141 pages while Hussain's people made do with 32, relying heavily on the substance of Lynch's arguments.

Soothing the ruffled lawyers with promises that he would "read each of your submissions with renewed wisdom and enthusiasm", Mr Justice Hildyard then turned to Robert Miles QC, Lynch's barrister, who promptly poured petrol on HPE's fire by saying: "What we want to know, and what I think the court is entitled to know, is which of the live witnesses who are coming here from their [HPE's] side who they are saying are in on the fraud that they have alleged, or some part of the fraud that they have alleged."

"I think Mr Rabinowitz has received the message," said the judge, "that if you allege fraud, you really, sooner rather than later, must identify the fraudsters. I will leave it at that for the moment with that warning."

Next week in HPE v Lynch and Hussain

On Monday Leo Apotheker, former HP CEO ("who is not said to be any part of anything" to do with fraud, in the judge's words) will take to the witness stand. As long-term Reg readers know, Mad Leo was defenestrated by HP after he pressed on with the Autonomy buyout – meaning he will probably have more than a few choice things to say about it.

In written submissions, Hussain's legal team told the court: "What should not be in dispute is that HP quickly abandoned Mr Apotheker's plan for the synergies: his vision of transforming HP into an information company was shelved, as was the plan to integrate Autonomy's products with Vertica, ie, the primary purpose of the acquisition."

The case will continue until at least December this year. ®

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