The former chief financial officer of British software shop Autonomy was today found guilty of fraud – after helping convince HP to splash out $11bn for the upstart back in 2011.
HP later had to write down $8.8bn when it realized what it had acquired was worth nowhere near the large pile of dosh it had stumped up.
Sushovan Hussain was Autonomy's top beancounter from 2001 to November 2011, and was a key player in the massive takeover, which boosted his personal wealth by $7.7m, according to court documents [PDF]. But when HP's investigators later went over Autonomy's books, they found the firm's value had been staggeringly inflated, forcing HP to write off billions of dollars a year after the ill-fated acquisition.
In 2016, British citizen Hussain, then 52, was nabbed by American prosecutors, and charged with 16 counts of wire and securities fraud regarding the Autonomy sale. He stood trial in a US federal district court in San Francisco after pleading not guilty in 2017.
Uncle Sam's lawyers alleged that, following the 2008 financial crash, Hussain and others conspired to make Autonomy's quarterly accounts look a lot better than they actually were. These techniques included slipping profits from one time period into another, taking early payments from otherwise long-term contracts, and making up figures from licensing sales.
Hussain was also accused of lying to regulators, independent auditors, analysts, and HP's own due diligence staffers prior to the acquisition to misrepresent the upstart's financial performance. The prosecution also claimed he was involved in "intimidating, pressuring and paying off," people who clocked the dodgy numbers in Autonomy's financial accounts. The ex-CFO subsequently tried, and failed, to wriggle out of court proceedings, claiming US judges had no jurisdiction over him. That argument was quickly binned.
Ex-Autonomy exec agrees to be a witness for HP fraud caseREAD MORE
As the 2011 HP deal loomed, Hussain went into overdrive, prosecutors claimed. Funds were rapidly rerouted, staff were instructed to book certain contract wins outside of the time period they were finalized, and the outfit emitted reassuring press releases extolling the company's profits.
Autonomy was at this point an "unsustainable Ponzi scheme," according to the prosecution.
After HP, today Hewlett-Packard Enterprise, took control and had a closer look at the books, the shortfall became apparent, and the US corp called in the regulators. The UK's Serious Fraud Office said there was no case to answer – however, the US government disagreed and indicted Hussain.
Hussain's defense team portrayed him as a victim of HP's incompetence, and said the the biz had been on a spending spree under the reign of then-CEO Leo Apotheker. Those purchases included Palm, which was hailed by King Leo as a crucial strategic move but later written off entirely. Hussain's lawyers argued the same was true of Autonomy: it was poorly handled by HP.
However, the jury in California wasn't buying it, and today convicted Hussain on all charges. The ex-CFO must cough up that $7.7m in personal profits, and may spend some time in an American cooler, depending on how his sentencing hearing goes.
"HPE is pleased with the verdict," a spokesperson for the IT goliath told The Register.
"As we have consistently maintained, Mr Hussain engaged in outright fraud and deliberately misled the market about non-existent sales through a series of calculated sham transactions.
"Autonomy manipulated their revenue, and quarterly results, making an accurate valuation impossible. 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."
Meanwhile, HPE is seeking damages of $5.1bn against Hussain and Autonomy cofounder and ex-CEO Mike Lynch in the High Court in London, England, alleging they engaged in fraudulent activities while executives at Autonomy. Lynch is countersuing HP, alleging the firm slandered his name, and is seeking $160m in damages. Both cases are due to appear before the High Court this year. ®