Meg Whitman, HP CEO, faces shareholder lawsuit over disastrous Autonomy deal

7 May 2013

The on-going dispute between US software group Hewlett-Packard (HP) and Autonomy, the UK company that it acquired for US$11.1bn in October 2011, before having to write down $5bn off its face value, has taken another dramatic step after shareholders launched a US lawsuit against Meg Whiteman, HP’s chief executive officer (CEO).

The shareholder lawsuit alleges that Whitman made false claims over the disastrous US$11.1bn sale, which was actually forced through by her discredited predecessor Léo Apotheker, but came in for fierce criticism from her when she took over the reins, particularly in regard to the accounting procedures at Autonomy.

The lawsuit, filed in federal court in San Francisco, US, claims that Whitman and other directors of HP failed in their fiduciary duties to shareholders in acquiring the firm. “Rather than evaluating this important transaction with eyes wide open, HP's fiduciaries consciously decided to proceed with eyes closed shut, ignoring the warnings of their own professional advisers,” alleges the lawsuit.

“Compounding the problem, after the acquisition closed, HP's fiduciaries misrepresented the facts to conceal their own failings.”

Whitman announced in November that HP was writing down the value of Autonomy by US$5bn due to alleged "serious accounting improprieties" at the company, and she said former unspecified members of the Autonomy board had misled investors over the true value of the firm. HP called on the UK's Serious Fraud Office (SFO) and the US authorities to investigate.

Autonomy's former CEO, Mike Lynch, and other members of the Autonomy management team said they “utterly rejected” all allegations of impropriety.

According to the US lawsuit, Whitman was “directly supervising Autonomy and Mike Lynch and therefore faces personal liability for her failure to manage and supervise” them properly after the sale went through and she took on responsibility for integrating the firm. Lynch has always argued that the plummeting value of Autonomy is down to bad management of HP.

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