SAN FRANCISCO (AP) — An $11 billion acquisition that backfired on Silicon Valley pioneer Hewlett Packard more than a decade ago will be resurrected Monday during a trial that will explore whether the deal was an illegal rip-off or a case of botched management.

The current legal case in a federal court in San Francisco centers on HP’s purchase of Autonomy, a British software company. This transaction was initially hailed as a success in 2011 but later turned into a costly failure.

Prior to finalizing the agreement, HP appointed Meg Whitman as the CEO of the business that was established 85 years ago by Bill Hewlett and Dave Packard in a garage located in Palo Alto, California. This garage has since become an iconic landmark in Silicon Valley.

Whitman achieved celebrity and financial success during her tenure as the head of eBay, an online retail platform in its early stages. She had envisioned that the acquisition of Autonomy would support her efforts to revitalize HP, but it ultimately turned into a burden that hindered the company’s progress.

Due to declining fortunes of HP, Whitman carried out large-scale layoffs and ultimately orchestrated a company split in 2015, dividing the long-standing corporation into two separate entities. In 2018, she resigned as the CEO of the spun-off company, Hewlett Packard Enterprises.

The accused individuals in the case are ex-CEO of Autonomy, Mike Lynch, who was previously praised as a prime example of British innovation, and Stephen Chamberlain, Autonomy’s former financial vice president. They are currently defending themselves against 16 charges of fraud and conspiracy in a trial that is projected to last until late May or June, and is set to feature over 40 witness testimonies.

If the jury finds Lynch and Chamberlain guilty, they could each be sentenced to more than 20 years in federal prison.

In 2019, Sushovan Hussain, the previous financial officer of Autonomy, was given a five-year prison sentence due to his conviction on 16 charges of fraud and scheming.

The impending trial of Lynch and Chamberlain will likely bring attention to Whitman, who used part of her estimated $3 billion fortune to fund an unsuccessful attempt at becoming the Republican Party’s nominee for California governor in 2010.

Shortly after facing that political obstacle, Whitman became a member of HP’s board and was subsequently chosen to take over as the company’s CEO in place of Leo Apotheker. Apotheker had overseen the acquisition of Autonomy before being replaced in September 2011, right before the deal was finalized.

At that point, HP was facing difficulties in staying current as the technological trend moved towards mobile computing, which was mainly fueled by the increasing popularity of smartphones. This shift caused a decrease in demand for desktop and laptop computers, which had previously been a key source of financial stability for HP. In an attempt to reduce its reliance on PCs, HP acquired Autonomy in order to obtain software that specialized in efficiently sorting through important data stored in email, phone records, and other sources.

However, HP discovered proof that Autonomy had manipulated their financial records in order to increase their worth once the acqusition was finalized. This caused Whitman to declare a loss of almost $9 billion for the purchase. As a result, the company faced allegations of illegal behavior, resulting in the indictment of Lynch and Chamberlain in 2018.

The civil trial, centered around accusations of fraud in London, caused a delay in the original trial. However, a 2022 ruling favored HP and suggested that the damages would be less than the $5 billion (3.9 billion pounds) originally sought. The exact amount of damages is yet to be determined.

In May, Lynch, who is 58 years old, was brought to the United States from another country. He has been abiding by court-ordered rules and living in San Francisco. He was allowed to stay out of prison by paying a bail bond of $100 million, with $50 million being in cash. He is currently waiting for his trial. According to legal records, Lynch earned over $800 million when Autonomy was sold to HP.

During the civil trial in London, Lynch asserted that he was never involved in any sneaky activities at Autonomy. He portrayed himself as a scapegoat for a poorly managed team under the leadership of Whitman, whom he depicted as being unqualified. Lynch also praised Autonomy as one of the top companies to come out of England.

Whitman, aged 67, criticized Lynch for being an unreliable leader and claimed that her objections to his actions “became increasingly vague and disconnected from the truth” before removing him from HP in 2012. It is not anticipated that she will be summoned to testify in Lynch’s court case, although her role as CEO of the company is likely to be closely examined during the trial.

Source: wral.com