US judge questions HP’s agreement with shareholders over Autonomy

A US judge questioned a proposed agreement between Hewlett-Packard Co and plaintiff shareholders to settle a lawsuit over the computing giant's botched acquisition of Autonomy Plc, Reuters reported.

At a hearing yesterday in San Francisco, US district judge Charles Breyer rejected several million dollars in fees that shareholder attorneys would have recouped under the settlement.

For approval of the remainder of the deal, he added he would need to make further inquiries into whether dismissing claims against HP officers, including current chief executive officer Meg Whitman, was fair for shareholders.

HP announced a $8.8-billion write-down in November 2012, just a year after acquiring Autonomy, and linked over $5 billion to accounting fraud and inflated financials by Autonomy executives, leading to the ouster of chairman Raymond J Lane and two other directors just tww weeks after being reelected (See: Autonomy acquisition ousts HP chairman, two directors).

However, the UK company and its executives had denied any wrongdoing.

Under the terms of the settlement reached in June, shareholder attorneys agreed to drop all claims against HP's current and former executives, including Whitman, board members and advisers to the company.

The company on its part, agreed to institute claims against former Autonomy executives, including chief executive Michael Lynch.

HP attorney Marc Wolinsky disclosed in court on Monday that HP also intended to sue the UK unit of Deloitte & Touche LLP over its role in auditing Autonomy Plc.

Deloitte said in a statement yesterday, that any HP claim "would be utterly without merit and we will defend ourselves strongly against it."

The judge rejected the company's plan to pay shareholders' lawyers as much as $48 million to help sue former Autonomy Corp executives. He said such a provision should not form part of accord shielding the management of the company from claims over the botched acquisition.

The lawyer fee arrangement with Cotchett Pitre & McCarthy LLP was ''potentially fatal'' to winning approval of a settlement that would protect Hewlett-Packard and target former Autonomy managers for investor claims over an $8.8 billion loss tied to the Autonomy purchase, Breyer said at a hearing in San Francisco, Bloomberg reported.

Former Autonomy chief financial officer Sushovan Hussain, one of the executives HP had targeted for legal action, was seeking to challenge the settlement, saying Hewlett-Packard executives should not be allowed to escape blame.

According to John Keker, Hussain's attorney, the agreement between HP and the Cotchett firm was a ''whitewash'' and an attempt to cover up wrongdoing.

Executives at HP and Autonomy had been engaged in a blame game over the 2012 writedown over the acquisition.

Hewlett-Packard alleged the UK-based software company had accounting irregularities and that HP was the victim of fraud by Autonomy management. According to former Autonomy executives Hewlett-Packard was at fault.