My HPE-funded lawyer wrote my witness statement, reseller boss tells High Court

Autonomy helped Capax Discovery repay its own contracts, he added

Autonomy trial The boss of an HPE-affiliated reseller asked a barrister "what is this exactly?" when shown a copy of his own witness statement in London's High Court. Capax Discovery CEO John Baiocco then said he was "pretty sure" his HPE-funded lawyer had written it for him.

Just to reinforce what he said, Baiocco then added that "these are somebody else's writings about what I might have said or didn't say, correct?" He appeared not to understand the English legal principle that witness statements are supposed to be written personally.

I just got here – what's it all about?

In 2011, HP bought Autonomy, a maker of software to keep track of unstructured data, founded by Mike Lynch in the UK for $11bn.

After the buyout, the US IT titan wrote down the value of Autonomy by $8.8bn, claiming the British firm had "misrepresented" its value. Lynch, Autonomy CEO at the time of the biz gobble, denies this.

HPE is now suing Lynch and Autonomy financial chief Sushovan Hussain at the High Court in London, seeking $5bn in damages. Over in the States, prosecutors are pursuing a separate criminal fraud case against Lynch and Autonomy bean-counter Stephen Chamberlain. All three men deny any wrongdoing.

A clearly startled Robert Miles QC, barrister for former Autonomy CEO Mike Lynch, queried Baiocco's evident belief: "Was this just something that was put in front of you and you just signed it without really thinking?" The barrister continued: "Who prepared this statement? Was it your own lawyer who prepared it, or was it HP's lawyers? Do you know?"

"I'm pretty sure it was my attorney," confessed Baiocco, hastily adding: "I don't know the answer to that question. You know, I reviewed it with my attorney and signed it in conversations with him."

Miles had asked earlier: "And is he [Christopher Belter, Baiocco's attorney] being paid for by HP?" The hapless reseller boss answered: "Yes."

Baiocco denied that he had met HP's lawyers before signing his witness statement to confirm that its contents were true. Though, while answering earlier questions, he confirmed he had met them a number of times before the US criminal trial against Autonomy chief financial officer Sushovan Hussain.

The truth, the whole truth and nothing but the truth

Capax Discovery's CEO had been called to the stand to testify about the firm's relationship with Autonomy as one of the latter's resellers. Early in his cross-examination, Baiocco confirmed that he had not met then-CEO Lynch or Hussain before 2011 – the year of Autonomy's buyout by Hewlett Packard, as the pre-split business was called.

He did, however, have dealings with Autonomy's US head of sales, Christopher Egan. Miles repeatedly questioned Baiocco over a "handshake deal" he had struck with Egan, alleging this protected Capax Discovery from having to pay Autonomy if an end customer backed out of a reseller sale for whatever reason. However, a copy of the 2009 reseller agreement between Capax Discovery and Autonomy was exhibited – and key parts of that document stated:

Once the Autonomy products on a purchase order have been shipped by Autonomy, VAR [value-added reseller] may not cancel or amend the purchase order without the prior written consent of Autonomy.

…

No alterations, modifications or additions to this agreement shall be valid unless made in writing and signed by a director or officer of each party.

…

VAR shall not be relieved of its obligations to pay fees owed to Autonomy hereunder by the non-payment of fees by an end user.

"Now," said Miles to Baiocco, "you knew about those clauses, didn't you, at the time?"

"I'm not sure about how much of this I actually read," replied Baiocco. "But I signed it."

Later on, Miles put it to the reseller boss that what was actually happening was Autonomy was funnelling cash to Capax Discovery in order to let the firm pay off its debts to the British software company. This allegation forms part of HPE's core case against Lynch and Hussain; namely that Autonomy secretly funnelled cash to resellers so they could pay off their Autonomy deals. It is claimed Autonomy did this in order to artificially inflate its sales revenues and make itself a more attractive takeover target to HP in 2011.

Lynch's barrister focused on one particular deal as an example of this, asking Baiocco if he was sure the money was coming in so he could repay Autonomy. Although neither side appears to dispute that money made its way from Autonomy to its resellers, the key difference is whether Autonomy was effectively loaning them cash to bridge short-term problems or whether this was fraud through fake deals signed purely to generate the appearance of real revenues.

"Can I suggest," Miles asked Baiocco, "that if you reached any kind of arrangement with Mr Egan, it was after the licence agreement and all that he was doing was saying, 'Look, I'll find a way of getting you the money until you get set up and running?'"

The reseller CEO replied: "That would be false. I knew flat out when I signed it that we were going to get the money on the handshake deal." He later added: "To me it was he was going to give me the money all the way through."

Baiocco also testified that he has sat on HPE's Partner Advisory Board since 2013 and that his company makes around $15m a year from HPE contracts.

The case continues. ®