By the time Hewlett-Packard Co.'s $8.8 billion write down of Autonomy was announced late last month, a number of the in-house lawyers who worked on the ill-fated deal — denounced by pundits as HP's worst ever — were already gone.
The share price tumbled with the news. And one claim in the resulting litigation is that HP is likely to go bankrupt within the next two years.
But the company's in-house lawyers already had plenty of reasons to head for the exits. In the past six years, employees have weathered debacles including the fallout from the pretexting scandal, former CEO Mark Hurd's departure after allegations of sexual harassment and former CEO Leo Apotheker's brief and rocky tenure.
Those highly public pratfalls have left the legal department that new general counsel John Schultz inherited in April tired and frustrated, according to interviews with a dozen former HP lawyers, several of whom were still with the company at the time of the Autonomy deal. Battered by scandal after scandal, some lawyers who remain at the company are afraid to hope for better.
"When you have various crises occurring in succession, any general counsel would be concerned about the morale in the department," said Daniel Cooperman, currently of counsel at Bingham McCutchen, who has served as general counsel at Apple Inc. and Oracle Corp.
The work is taxing, and the rewards are in question. HP's stock options, a key component of compensation packages in Silicon Valley, are dwindling in value. And bonuses in the legal department are notably smaller this year, a source at HP said. One former HP lawyer said she and her colleagues felt they were working harder than ever to right the ship for less and less pay. And the ranks of those colleagues have been very much in flux. The legal department saw several rounds of layoffs during GC Michael Holston's tenure, and some lawyers have taken advantage of a voluntary early retirement offers extended by CEO Meg Whitman this May.
"What's getting lost in all the bad press is that you've got a lot of people that are working their asses off to try to make HP successful," a source at the company said. "It hurts our morale, and it hurts our ability to focus on what we're trying to do."
Schultz, who joined HP in 2008, may face the tallest orders of all. After overseeing the internal investigation of the Autonomy debacle, including a forensic review by PricewaterhouseCoopers, Schultz must now deal with the wave of litigation that the allegations have triggered — at least seven shareholder lawsuits so far in the Northern District of California.
Many in Silicon Valley thought the $11 billion HP paid for the British data-mining software maker was far too much when the deal was announced in August 2011.
Schultz, who declined to be interviewed, may also face scrutiny about the legal department's handling of the deal. Accountants shoulder the primary responsibility for detecting cooked books during due diligence, M&A experts say. But legal and accounting due diligence sometimes overlap and concerns raised about Autonomy's books before the negotiations began should have influenced the lawyers' approach, said Eric Talley, a corporate law professor at UC-Berkeley School of Law.
