Judge rules HP, Whitman must defend shareholder suit over Autonomy acquisition

But the judge also said the plaintiffs must limit claims to statements made after May 23, 2012

A judge has ruled that Hewlett-Packard and its CEO, Meg Whitman, must mount a defense against a shareholder class action lawsuit claiming that Whitman and HP made misleading statements about the acquisition of Autonomy.

HP spent more than $US10 billion to acquire Autonomy in October 2011, but subsequently wrote off $8.8 billion of the purchase as the result of what it termed to be serious accounting irregularities by Autonomy prior to the deal.

The class action, filed in November 2012 by lead plaintiff PGGM Vermogensbeheer B.V., alleged that HP and other named defendants "knew or should have known" that "corporate governance firms, auditors, media and analysts had questioned Autonomy's market value due to concerns about its accounting practices, and whether its reported growth rates and margins had been artificially inflated."

US. District Court Judge Charles Breyer ordered the case to proceed in a ruling filed in US District Court for the Northern District of California.

But the judge's ruling wasn't entirely in favor of the plaintiffs.

"First, the complaint fails to establish 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," Breyer wrote. "It is implausible that had Defendants known about the fraud being perpetrated on them before the deal closed that they would have gone ahead with the deal."

Breyer also ruled that the case could only center on statements made by the defendants about Autonomy following May 23, 2012. A member of Autonomy's senior staff came forward as a whistleblower following the dismissal of Autonomy CEO Mike Lynch on that date, according to the complaint.

"This suggests that the earliest possible date Whitman could have learned of Whistleblower No. 4's allegations would have been May 23," he wrote.

But in talking about Autonomy's financial performance during a subsequent conference call, Whitman "omitted material information which the complaint alleges she possessed at the time, namely that she was considering accounting fraud at Autonomy as the explanation for its weak performance," Breyer wrote.

"Whitman knew that if Whistleblower No. 4's allegations were true, the fraud would explain Autonomy's under performance rather than 'classic entrepreneurial [c]ompany scaling challenges,'" he added. "Whitman's decision to put forward entrepreneurial challenges as an explanation while choosing not even to mention the alternative possibility of accounting fraud, which she knew to be plausible, constitutes a material omission."

Breyer also dismissed claims made against former HP CEO Leo Apotheker, Lynch and three others named in the suit.

An HP spokesman declined to comment on the ruling Wednesday.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

Tags business issueslegalCivil lawsuitsMeg Whitmanhardware systemsLeo ApothekersoftwareMike LynchMergers and acquisitionsHewlett-PackardservicesAutonomy

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Chris Kanaracus

IDG News Service

Comments

Comments are now closed.

Most Popular Reviews

Follow Us

Best Deals on GoodGearGuide

Shopping.com

Latest News Articles

Resources

GGG Evaluation Team

Kathy Cassidy

STYLISTIC Q702

First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni

STYLISTIC Q572

For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Steph Mundell

LIFEBOOK UH574

The Fujitsu LifeBook UH574 allowed for great mobility without being obnoxiously heavy or clunky. Its twelve hours of battery life did not disappoint.

Andrew Mitsi

STYLISTIC Q702

The screen was particularly good. It is bright and visible from most angles, however heat is an issue, particularly around the Windows button on the front, and on the back where the battery housing is located.

Simon Harriott

STYLISTIC Q702

My first impression after unboxing the Q702 is that it is a nice looking unit. Styling is somewhat minimalist but very effective. The tablet part, once detached, has a nice weight, and no buttons or switches are located in awkward or intrusive positions.

Latest Jobs

Shopping.com

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?