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Summary: Judge Charles Breyer ruled in a California federal court that he will need to review more evidence before he can approve a settlement reached between Hewlett-Packard and its shareholders over claims stemming from the company’s botched acquisition of Autonomy Plc.
Reuters reports that U.S. District Judge Charles Breyer rejected a proposed settlement between Hewlett-Packard Co. and plaintiff shareholders on Monday in a hearing in San Francisco. The proposed agreement would have settled a lawsuit that alleged a botched acquisition of Autonomy Plc. In his ruling, Judge Breyer simply said, “That’s out,” in response to the millions of dollars of fees Hewlett-Packard offered to settle the claims.
Judge Breyer wasn’t the only one to second-guess the settlement. Former Autonomy Chief Financial Officer Sushovan Hussain stated through his attorney John Keker that the deal was “a whitewash” and expressed desire to review internal Hewlett-Packard documents that absolve Meg Whitman, Chief Executive Officer of Hewlett-Packard, and other executives of any wrongdoing. Keker went so far as to say “This is a joke…if it were a carcass, animals would walk around it, it stinks so much.”
In November of 2012, Hewlett-Packard announced an $8.8 billion writedown, which was approximately a year after buying Autonomy. More than $5 billion of the writedown was attributed to accounting fraud and inflated financials by Autonomy executives. Autonomy has denied any wrongdoing on its part. The allegations have triggered an investigation by the U.S. Securities and Exchange Commission and the Federal Bureau of Investigation. The Serious Fraud Office of the United Kingdom has also joined the investigation.
Judge Breyer added that he would have to make further inquiries to determine whether dismissing claims against Hewlett-Packard officers, including Whitman, was fair to the shareholders. The settlement, reached this past June, would call for shareholder attorneys to drop all claims against current and former executives of Hewlett-Packard. Hewlett-Packard would then join shareholders to bring claims against former executives of Autonomy, including Michael Lynch, Chief Executive of the British company. Shareholder attorneys would have received a whopping $18 million in attorneys’ fees.
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Marc Wolinksy, attorney for Hewlett-Packard, argued on Monday that the company also intended to sue Deloitte & Touche LLP over its role in auditing Autonomy. Deloitte & Touche responded in a separate statement that any such claim “would be utterly without merit and we will defend ourselves strongly against it.” Wolinsky also stated that Hewlett-Packard would fight Hussain’s request to review any documents. The company will either continue its bid to settle the suit, or it will dismiss the shareholder litigation.
Another hearing is scheduled for next month to determine how the case will proceed. Breyer acknowledged that “something went terribly wrong” with Hewlett-Packard’s acquisition of Autonomy, and stated he would need to review evidence to further analyze the events.
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