Autonomy trial A witness who worked on the Autonomy finance team told London's High Court during the long-running Autonomy trial that the firm had indeed been accounting for some hardware sales as marketing expenses in its annual accounts.
Elizabeth "Lisa" Harris, who listed her business address as the same Cambridge office block that houses HQ Mike Lynch-owned infosec biz Darktrace, said in witness statements to the court that some hardware sales were being accounted for in marketing. Her assertion could be read as backing up one of HPE's claims against Lynch in the long-running Autonomy Trial.
In a November 2018 witness statement filed with the court, Harris said: "My understanding was that costs were allocated to sales and marketing for loss-making hardware because hardware was being used as a loss-leader in the US to put Autonomy and Autonomy's software in front of big-name US clients."
Back at the trial's opening in March 2019, HPE barrister Laurence Rabinowitz QC described these as "improper hardware sales" that were used to manipulate Autonomy's accounts into meeting the quarterly predictions of financial analysts – and keeping the firm's share price stable, thus making it a more attractive buyout target.
Harris also blamed HP M&A bod David Duckworth for grouping Autonomy's "hardware sales together with software licence sales in HP's finance system" in the immediate aftermath of the buyout. She continued: "When I questioned this he explained that HP thought that the distinction between hardware and software sales was not material and, according to Mr Duckworth, it was all 'product' from HP's perspective. This idea did not emanate from Autonomy and it was not hidden from HP."
Just to hammer the point home, she later said: "They [HP] were not interested in showing hardware separate from software. To HP, it was all product and HP's view was that it was not separate (such as services would be)."
Consistent with Lynch's earlier testimony in the case, Harris praised Deloitte's "robust" approach to auditing Autonomy's accounts.
Bigging up Deloitte for doing everything right and giving Autonomy's accounts an impeccable green light is one of the dominant themes in Lynch's legal defence.
Most of her witness statement was written in response to an HPE legal filing with the court, claimed to be a note made of a meeting Harris had with PwC investigators. She also said: "At no time did Mr Hussain want me to account for things in a way that was 'plainly wrong' as the note suggests," going on to assert: "I did not tell PwC that I was ever asked to lie to Deloitte, by Mr Hussain or anyone else. I did not lie to Deloitte and, so far as I know, no one at Autonomy ever lied to Deloitte."
Today the High Court will begin hearing oral closing arguments from Lynch's legal team, with Hussain's later in the week. The Autonomy trial is not yet done, however; the court is expected to reconvene in February or March to hear yet more evidence before the judgment is handed down, currently expected to be before May this year. ®