The story so far: How

Autonomy trial How far has HPE come to prove its $ 5 billion fraud accusations against former Autonomy CEO Mike Lynch and co-defendant CFO Sushovan Hussain? While the world enjoys the summer sun, we closely observe the last three months of court hearings to decide.

Regular readers know very well about the Autonomy trial, which has been in full swing since March 2019. Mr. Judge Hildyard, the presiding judge, has seen dozens of witnesses testify, including former HP CEOs , Leo Apotheker and Meg Whitman.

And who could forget Mike Lynch's marathon month in the witness box, where he was subjected to a close interrogation? by HPE lawyer, Laurence Rabinowitz QC?

However, the purpose of any judicial proceeding is to establish which side has proven its case. While the theatricality of the Autonomy trial has certainly sold thousands of bags of popcorn throughout the English-speaking technological world while everyone watches the revelations coming out of the London High Court, a close look is needed on what HPE alleges in front of what the witnesses have said. until now.

In his opening statement to the court, Rabinowitz summed up the case against Lynch and Hussain:

HPE's detailed claims cover 894 pages only in its written opening. While The Reg had a quick shufti in them at the beginning of the case in March, we can now take a new look with the advantage of the testimony of five months of witnesses to shed more light.

In addition to the long previous passage, HPE alleges that once it showed interest in buying Autonomy, the two "repeated most, if not all, those false and misleading statements directly to Bidco, Hewlett-Packard's acquisition vehicle, as a result of which Bidco, we say, paid much more for Autonomy and for the actions of the defendants in Autonomy than it would have paid otherwise, if it had proceeded at all with the acquisition. "

All allegations of fraud and wrongdoing by HPE can be summarized in five broad areas:

  • Violin hardware revenue
  • Misrepresent the Autonomy SPE product on the market
  • Dodgy reseller deals (known at the trial as "VAR" allegations)
  • Doubtful hosting arrangements
  • IDOL OEM transaction ions

This article will focus on a couple of relevant things that were said about the hardware, with subsequent articles in this series that analyze each of the other pointed areas in turn.

Who said August had to be a holiday anyway?

The devil is in the …

As everyone who has followed the broad momentum of HPE's accusations over the years knows, the American technology business says that Lynch and Hussain hid the scale of Autonomy hardware sales from the market and HP when he forgot the British software company with checkbook in hand.

In a press release issued in 2012 blaming Lynch and Hussain for the accounting mishaps of Autonomy, HPE (or HP as it was then) said hardware sales comprised "10-15 percent of Autonomy's revenue" , expressed in a way that, as Lynch lawyer Robert Miles QC said on the third day of the trial, it seemed that this was "something HP had discovered relatively recently."

Lynch's legal team has argued that This was not the case, although HP has tried to say that, in some cases, especially in transactions with EMC, Autonomy's hardware sales were in fact "losses," to which Lynch responded in court: "Well, not when you take marketing into account … Deloitte [Autonomy’s auditor] knew exactly what the costs and sales were."

Many of the key exchanges in transcripts so far could be taken anyway. Right at the end of Lynch's time in the witness box, the HPE lawyer asked him about a hardware offer that Autonomy made to EMC. As Rabinowitz said: "What Mr. Hussain [in an email chain shown in court] seems to say is that if EMC buys software for $ 5 million from Autonomy, Autonomy will spend another $ 5 million on EMC hardware, right?"

Lynch denied this, with Miles then showing the court another email referring to an EMC requirement for "redundancy, failover and replication" hardware, trying to refute the HP question line that implies that the sale Hardware was performed exclusively to increase Autonomy's revenue and ensure the agreement was effectively cost neutral.

Deloitte knew, or did they know

Auditor Lee Welham was called as a witness in June, and was questioned by Lynch's lawyer on the issue of hardware revenue. Part of HPE's detailed allegations against Autonomy accounting say that Autonomy described itself as a "pure game software" company, which Lynch repeated in person by HP's former CEO Apotheker.

Pointing Welham to a series of documents describing Autonomy's 2010 audit plan, something jointly carried out by Deloitte and the company's internal audit committee, Miles read some sentences:

Look, Miles I was telling the court, Deloitte not only knew that Autonomy was selling hardware, but also closely involved with the precise details of how it was accounted for and appeared in published finances.

Whatever the decision of Mr. Justice Hildyard (who pointed out expressly, on the last day of rest in early August, "This has been a great exegesis and I have many moons of thinking even in my mind"), If Autonomy hardware accounting cheated HP before the 2011 purchase will play an important role in the final judgment.

The Autonomy trial resumes at the beginning of September. It is expected to be exceeded in January 2020 with a trial sometime before May of that year. ®

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