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HP CFO Cathie Lesjak didn't even read KPMG's Autonomy due diligence before $11bn biz gobble
Now you can do exactly what she didn't: Pore over it – download our obtained copy of the report
Autonomy Trial Cathie Lesjak, HP’s former chief financial officer, told the High Court in London this week that she did not read a KPMG due diligence report on British software firm Autonomy before her company blew $11bn buying it.
Barrister Robert Miles QC asked her: “I think you didn’t, yourself, read a due diligence report prepared by KPMG, is that right?” Lesjak replied: “I did not.”
The consultancy giant's report was the only external due dil HP commissioned into Autonomy before the former went ahead with the mega-acquisition of the latter in August 2011. About a year later, HP announced an $8.8bn write-down as a result of the biz gobble, alleging it had been misled on the Brit software developer's true value.
However, Lesjak admitted in the High Court that her finance team at HP had not calculated the precise losses that HP publicly attributed to Mike Lynch, Autonomy’s founder and CEO, and Sushovan Hussain, Autonomy’s CFO.
Miles, Lynch’s barrister, pressed Lesjak hard while showing her an internal HP email from the time of the takeover, saying: “There was never a proper calculation to attribute the irregularities to the amount of the write-down, was there?”
Lesjak said that Andy Johnson, an HP finance functionary, had done those calculations, to which Miles scoffed: “Well, where is it, Ms Lesjak? We have never seen it. We’ve never seen a single document that suggests that took place.”
After the judge Mr Justice Hildyard intervened to ask if Lesjak had any proof of this, the former chief beancounter admitted: “I don’t know if there was – it was ever in writing. It was a verbal conversation.”
A jubilant Miles jeered: “It’s just not true, is it, Ms Lesjak,” later accusing her of “making this up.”
With no documentary proof being shown to the court to back up Lesjak’s evidence that Lynch and Hussain’s alleged fraud had been carefully quantified, HP’s case has become more difficult to prove.
Lesjak also testified that Johnson “specifically told me that from his point of view, the valuation [of Autonomy, in HP’s eyes] going down from 9.5 [billion dollars] to [$]3.5[bn] of the stand-alone value, $6bn, was driven by what we learned in the forensic investigation and could fairly be considered accounting improprieties, disclosure failures and misrepresentations. And that's what I relied on, because he was the keeper of the model.”
The ex-CFO, who retired in February this year, also testified that “Mad King Leo” Apotheker, the CEO of HP at the time of the disastrous Autonomy buyout, not only tried to fire her but also wanted to splurge yet more billions buying other software companies.
Britain’s biggest fraud trial continues. Mike Lynch himself is rumoured to be giving evidence in person during July. ®
Because we know our readers are all experienced multinational C-suite executives who are far more capable of running multi-billion-dollar corporations than the people actually tasked with doing those jobs, we’ve obtained the actual KPMG draft due diligence report on Autonomy for your reading pleasure. As regular readers know, no final report was ever produced before HP, under CEO Leo Apotheker, went ahead with the acquisition, one of the largest in the US tech titan's history.
Here it is, all 86 pages of it in PDF format. Enjoy.