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 Under the terms of the settlement, involving three lawsuits, the
attorneys for the shareholders have agreed to drop all claims
against HP's current and former executives, including CEO Meg
Whitman, board members and advisers to the company, the source said.
The exception to that will be former officials at Autonomy. As part
of the agreement, the shareholders' attorneys will assist HP in
pursuing claims against Autonomy's co-founder and former CEO Michael
Lynch, its former chief financial officer Sushovan Hussain, and
potentially others related to Autonomy, the source said. The precise
nature of such claims and when HP might file them could not be
learned.
The settlement, which followed mediation, is expected to be
announced as soon as Monday. The source said it is likely to be
signed before Monday.
HP took an $8.8 billion impairment charge in November 2012 for its
purchase of Autonomy only just over a year earlier, with more than
$5 billion of that linked to what HP said at the time were "serious
accounting improprieties, misrepresentation and disclosure
failures."
The size of the loss, and the speed with which it occurred, marks
the deal as one of the most disastrous done by a major company in
recent years.
In particular, sources close to an HP investigation into the matter
say that the technology giant believes that Autonomy’s results and
prospects were made to look much better than they were.
Lynch has consistently denied HP’s allegations, saying HP is blaming
him for its own failure to manage Autonomy after the acquisition.
A spokesman for Lynch said that "we continue to reject HP's
allegations." He said it appears that Whitman will be using a large
sum of HP’s money to avoid explaining in court why she made the
November 2012 allegations regarding Autonomy. "We hope this matter
will now move beyond a smear campaign based on selective disclosure
and HP will finally give a full explanation,” the Lynch spokesman
added.
HP responded by saying that it has evidence showing how Autonomy
"created the illusion" that it was a high-growth company. “This had
the effect of misleading investors and HP”, it said in a statement.
Hussain has not responded to calls and emails. His lawyer, John
Keker, a founding partner of Keker & Van Nest LLP in San Francisco,
did not respond to requests for comment.
SHARED RESULTS OF PROBE
Shareholders had sued HP board members and executives, accusing them
of breaching their fiduciary duties and wasting corporate assets.
The lawsuits sought corporate governance changes at HP, attorneys’
fees, and the ability to pursue damages claims against those
responsible for the acquisition.
Former HP chief executive Leo Apotheker, the architect of the
Autonomy deal who was ousted in September 2011 just weeks after it
was announced, said he believed the conclusions of a special
committee of HP board members that has reviewed the shareholder
lawsuit would be a "welcome measure of vindication".
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"Mr Apotheker has maintained all along that he acted with integrity,
good faith and in partnership with the HP Board on the Autonomy
acquisition," a spokeswoman for Apotheker said in a statement.
HP has shared the results of its investigation into accounting
questions at Autonomy with attorneys representing the shareholders,
the source familiar with the negotiations said.
One of the law firms representing shareholders in the settlement,
Robbins Geller Rudman & Dowd LLP, declined to comment. The other
firm, Cotchett Pitre & McCarthy LLP, was not immediately available
for comment.
The attorneys representing shareholders will receive fees for
helping HP pursue any further claims, the source said. Additional
terms of HP’s settlement with shareholders are unclear.
HP's allegations of accounting improprieties, misrepresentation and
disclosure failures at Autonomy have prompted an investigation by
the U.S. Securities and Exchange Commission and the Federal Bureau
of Investigation, as well as the UK's Serious Fraud Office.
The U.S. authorities have asked for more documents and interviewed
several witnesses in recent weeks, sources familiar with the HP
investigation said.
Representatives of the FBI and the SEC declined to comment. The SFO
said its probe was "very much in progress.”
It is unclear if the investigations by the authorities in the U.S.
and UK will lead to action against any parties involved in Autonomy
or HP’s deal to acquire it.
At the end of March, HP also settled a lawsuit that accused the
personal computer maker's former management of defrauding
shareholders by abandoning a business model it had long touted. In
that case, the company agreed to pay shareholders $57 million.
The lawsuit was filed after former CEO Apotheker shocked investors
on August 18, 2011 by announcing plans to refocus the company on
business services and products, which included the Autonomy
purchase.
(Reporting by Nadia Damouni, Casey Sullivan and Paul Sandle;
Additional Reporting by Dan Levine; Editing by Martin Howell and
Pravin Char)
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