Prosecutors in the Autonomy trial in San Francisco are not holding back from demonizing a senior Autonomy executive.
In a sentencing memo put forward this week, they accused [PDF] the former CFO of the British software company, Sushovan Hussain, of being equivalent to "a James Bond villain or a Mafioso." Hussain, who was chief beancounter for a decade, was found guilty of criminal fraud last year by a US court, although HPE's UK civil lawsuit against the Brit biz is still ongoing.
This all centers on HPE's disastrous purchase of Autonomy in 2011: the American IT giant paid $11bn for the smaller company, then had to write down nearly $9bn of that, accusing the biz of misleading it about its true value. Hussain was nabbed by the Feds and tried in America regarding the acquisition, and ultimately convicted of fraud by a jury. Now, the courts are wondering how to punish him.
"The pervasiveness and persistence of [Hussain's] fraud and lies are remarkable," prosecutors insisted. "He lied to people over and over for years to accomplish his fraud… He fired anyone who raised her head 'above the parapet' or otherwise questioned his conduct. He boasted that Autonomy was outside of the reach of US authorities… In that sense, Hussain is an especially dangerous criminal."
It's safe to say that federal prosecutors are not big Hussain fans. They have asked the court to go beyond the maximum sentencing guidelines of 87-108 months for the offenses he's been found guilty of. Instead they want "no less than 144 months in prison… restitution to HP in the amount of $1.7bn, order forfeiture in the amount of $9,227,657… and a maximum fine of $4m."
Previously the judge had indicated that he was thinking of $6m in restitution and between seven and nine years jail time. But that would "understate the severity" of what Hussain did, the prosecutors argue.
And to make the case, the prosecutors go so far as to provide a gallery of rogues to compare Hussein to. There's Charles McCall, chair of McKesson, who got 120 months in jail for an $8.6bn loss; WorldCom CEO Bernard Ebbers who got 300 months for more than $1bn in losses; and Sanjay Kumar, Computer Associates' CEO, who got 144 months for loss of more than $400m. And that's just three of the 10 in the memo.
"The average sentence for these ten (10) cases is 169 months," it notes. "While not scientific, these selected cases show that courts have sentenced defendants to lengthy terms of prison for frauds that caused far less financial loss than Hussain."
Not only do they want him in jail for as long as possible, they also want him stripped of everything of value he has, claiming that the $60m in shares he has were handed over as "hush money" from Autonomy founder Michael Lynch in return for him not cooperating.
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"Today, Hussain is personally worth at least $60 million, and likely much more. What, if anything, did Hussain really do to earn this $60 million windfall during the very period he was the subject of an array of criminal, regulatory, and private investigations in two countries?"
They even start getting fancy with the words: "Crime can never pay. Yet, the proverbial pot of gold awaits Hussain at the end of any sentence the Court may impose. This anathema warrants an even more substantial prison sentence. Hussain, completely undeterred and accepting no responsibility for his years of crime, looks forward to an unearned and undeserved payday in Lynch’s enterprise the minute he steps out of prison."
It's not unusual for prosecutors to amp up how awful someone is in a sentencing memo. But it does appear that in this case there is genuine disgust.
"Hussain employed virtually every accounting trick in the book – backdating, channel stuffing, roundtrip transactions, undisclosed side agreements, feigned delivery, and massive hidden hardware sales – to create the false appearance that Autonomy was growing when, in fact, it was really flat-lining, like so many other technology companies in the wake of the 2008 Financial Crisis."
"Greed and hubris motivated Hussain to pretend Autonomy thrived when, in fact, it stagnated like other companies in the tech sector in 2009-2010. As the testimony of the market analysts demonstrated, Autonomy’s (false) claims of growth inflated its stock price while taking advantage of other competitors in the marketplace. By his fraud, Hussain deceived Autonomy’s shareholders, its regulator, analysts that covered the company, and ultimately, the Hewlett-Packard Company, which bought Autonomy for $11.7 billion in October 2011."
Crossing the Atlantic...
Meanwhile, over in the UK in a parallel civil case over the catastropic purchase of Autonomy by HPE, the so-called "chief architect" of Autonomy, Fernando Lucini – who was called as a witness by HPE – said this week that he had no idea why Autonomy paid $7.6m to license software from reseller DiscoverTech, especially because it didn't need it.
HPE claims that the purchase was just one part of a much larger scheme to fraudulently inflate the value of Autonomy. But it didn't help that Lucini was forced to admit on the stand that despite his grand title, he had no say over such purchases, or how much was paid, or even why the decision was made. Hardly a good look. ®