HPQ HP Inc

By Jay Greene 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 1, 2018).

A federal jury found Autonomy Corp.'s former financial chief guilty of falsifying financial statements and exaggerating the British software maker's value before its sale to Hewlett-Packard for $11 billion in 2011.

If upheld, the fraud conviction of Sushovan Hussain after a six-week trial in San Francisco would offer some vindication to H-P executives who have long alleged Autonomy's management cooked the books before one of its biggest acquisitions.

H-P initially billed the acquisition as key to transforming itself into a software powerhouse and anchor its forays into hot fields like data and analytics. Instead, the deal was an embarrassment for H-P, which took an $8.8 billion charge and grappled with shareholder lawsuits. H-P later split into two companies and sold off parts of Autonomy.

The federal jury found Mr. Hussain guilty on 16 separate counts of wire and securities fraud after prosecutors brought charges against him in November 2016 for engaging in a "fraudulent scheme" to deceive Autonomy's investors and H-P about the company's financial health and prospects for growth.

Acting U.S. Attorney Alex G. Tse said Mr. Hussain's false and misleading statements defrauded HP of more than $11.7 billion.

"The jury verdict affirms that corporate criminals who cook their company's books to the detriment of victims in the U.S., and specifically this district, will be held to account in our courts," Mr. Tse said in a statement.

Mr. Hussain's lawyer, John Keker, said he was disappointed with the verdict and intends to appeal.

"Defense evidence of Hewlett-Packard's conduct in the year following the acquisition, which would have shown the jury that HP was not in fact misled at all, was excluded from evidence and will be one basis for the appeal," Mr. Keker said in a statement.

Prosecutors accused Mr. Hussain of artificially inflating Autonomy's revenue, making false and misleading statements about company finances, and issuing false and misleading quarterly and annual reports. The indictment also included allegations of "intimidating, pressuring and paying off persons who raised complaints about or openly criticized Autonomy's financial practices and performance."

The verdict could aid in a lawsuit filed in the U.K. in 2015 by H-P against Mr. Hussain and Autonomy's former CEO, Mike Lynch, seeking $5.1 billion in damages. Mr. Lynch countersued, seeking more than $150 million in damages and placing the blame for the failed deal on H-P's mismanagement. The trial is scheduled to begin next year.

Hewlett-Packard wrestled with the fallout from the Autonomy acquisition for years. In addition to the write-down in 2012, Hewlett-Packard agreed to pay $100 million to settle a shareholder lawsuit related to the Autonomy acquisition.

Hewlett-Packard split into two companies in 2015 -- Hewlett Packard Enterprise Co. and HP Inc. -- and HPE eventually sold off parts of Autonomy. The company, which maintained that Mr. Hussain engaged in fraud "through a series of calculated sham transactions," said on Monday it was pleased with the verdict.

"That Mr. Hussain attempted to depict the fraud as nothing more than a misunderstanding of international accounting rules was, and still remains, patently ridiculous -- and the jury has now held him accountable for his role in defrauding HP," the company said in a statement.

A hearing is scheduled for Friday to determine Mr. Hussain's bail and sentencing.

Write to Jay Greene at Jay.Greene@wsj.com

(END) Dow Jones Newswires

May 01, 2018 02:47 ET (06:47 GMT)

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