HP, Whitman must defend shareholder suit over Autonomy acquisition
But the judge in the case also said the plaintiffs must limit claims to statements made after May 23, 2012
IDG News Service - A judge has ruled that Hewlett-Packard and its CEO, Meg Whitman, must mount a defense against a shareholder class action lawsuit claiming that Whitman and HP made misleading statements about the acquisition of Autonomy.
HP spent more than $10 billion to acquire Autonomy in October 2011, but subsequently wrote off $8.8 billion of the purchase as the result of what it termed to be serious accounting irregularities by Autonomy prior to the deal.
The class action, filed in November 2012 by lead plaintiff PGGM Vermogensbeheer B.V., alleged that HP and other named defendants "knew or should have known" that "corporate governance firms, auditors, media and analysts had questioned Autonomy's market value due to concerns about its accounting practices, and whether its reported growth rates and margins had been artificially inflated."
U.S. District Court Judge Charles Breyer ordered the case to proceed in a ruling filed Tuesday in U.S. District Court for the Northern District of California.
But the judge's ruling wasn't entirely in favor of the plaintiffs.
"First, the complaint fails to establish any coherent motive as to why Defendants would knowingly purchase a company for several times its actual value or that they knew Autonomy's accounting was problematic," Breyer wrote. "It is implausible that had Defendants known about the fraud being perpetrated on them before the deal closed that they would have gone ahead with the deal."
Breyer also ruled that the case could only center on statements made by the defendants about Autonomy following May 23, 2012. A member of Autonomy's senior staff came forward as a whistleblower following the dismissal of Autonomy CEO Mike Lynch on that date, according to the complaint.
"This suggests that the earliest possible date Whitman could have learned of Whistleblower No. 4's allegations would have been May 23," he wrote.
But in talking about Autonomy's financial performance during a subsequent conference call, Whitman "omitted material information which the complaint alleges she possessed at the time, namely that she was considering accounting fraud at Autonomy as the explanation for its weak performance," Breyer wrote.
"Whitman knew that if Whistleblower No. 4's allegations were true, the fraud would explain Autonomy's under performance rather than 'classic entrepreneurial [c]ompany scaling challenges,'" he added. "Whitman's decision to put forward entrepreneurial challenges as an explanation while choosing not even to mention the alternative possibility of accounting fraud, which she knew to be plausible, constitutes a material omission."
Breyer also dismissed claims made against former HP CEO Leo Apotheker, Lynch and three others named in the suit.
An HP spokesman declined to comment on the ruling Wednesday.
Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com
- 15 Non-Certified IT Skills Growing in Demand
- How 19 Tech Titans Target Healthcare
- Twitter Suffering From Growing Pains (and Facebook Comparisons)
- Agile Comes to Data Integration
- Slideshow: 7 security mistakes people make with their mobile device
- iOS vs. Android: Which is more secure?
- 11 sure signs you've been hacked
- Pay-as-you-Grow Data Protection: IBM Tivoli's Full-featured Data Protection Suite for Small to Medium Businesses IBM Tivoli Storage Manager Suite for Unified Recovery gives small and medium businesses the opportunity to start out with only the individual solutions...
- Streamline Data Protection with IBM Tivoli Storage Manager Operations Center IBM Tivoli Storage Manager (TSM) has been an industry-standard data protection solution for two decades. But, where most competitors focus exclusively on Backup...
- Simplify and Consolidate Data Protection for Better Business Results Learn about IBM® Tivoli® Storage Manager Operations Center, which provides advanced visualization, built-in analytics and integrated workflow automation features that leapfrog traditional backup...
- HP HAVEn: See the big picture in Big Data HP HAVEn is the industry's first comprehensive, scalable, open, and secure platform for Big Data. Enterprises are drowning in a sea of data...
- Meg Whitman presents Unlocking IT with Big Data During this Web Event you will hear Meg Whitman, President and CEO, HP discuss HAVEn - the #1 Big Data platform, as well...
- The New Way to Work Knowledge Vault This Knowledge Vault focuses on how, in today's increasingly virtual world, it's more important than ever to engage deeply with employees, suppliers, partners,... All Legal White Papers | Webcasts