"This may cast some doubt on the performance of HP's in-house legal department and outside counsel," he said. "Autonomy wasn't the type of company that people would be stunned to see this from."
HP lawyers are discussing the due diligence they conducted during the acquisition to determine whether they could have detected any improprieties at Autonomy before the whistleblower came forward, a source at HP said. But at least two key players are no longer around for the conversation. Former deputy general counsel Paul Porrini, who led HP's in-house legal team for the deal, left in July to become general counsel of YuMe, a video advertising company. Former associate general counsel Edward Rockwell, who stepped down in March to take the top legal job at data solutions company DataDirect Networks Inc., worked with Porrini on the deal.
Porrini appointed Sergio Letelier, who is based in Geneva, to serve as lead on the offer documentation team, a source at the company said. Associate general counsel David Ritenour also worked on the deal, Recorder sibling publication The Am Law Daily reported last August. Gibson, Dunn & Crutcher was HP's lead outside counsel for the deal.
Although dozens of internal and external lawyers work on deals of this magnitude, the general counsel is ultimately responsible for due diligence, said Robert Stefanski, a Reed Smith partner who served as general counsel of TIBCO Software Inc. Charles Charnas, a long-time HP lawyer who was acting GC before leaving in 2008, is confident that Holston, who declined to be interviewed, would have brought any concerns to the board. "That was his job, and he was determined to do it correctly," Charnas said. With the internal discussions leading up to the Autonomy deal largely a mystery, Talley noted that lawyers may have unearthed concerns that were disregarded by the board. Several former HP lawyers said the legal department's advice was respected but not always heeded during acquisitions.
"Sometimes these deals take on a huge momentum of their own," said Ian Hardcastle, a former patent lawyer at HP. "It's very hard to stop the train."
Earlier this month at HP's headquarters in Palo Alto, the lights were low in Building 20, which houses the executive suite and the legal department, among others. A downsized Christmas tree was on display in the temporary lobby — the permanent one has been under construction for more than a year. A pair of security guards chatted about how a number of local companies are choosing Apple for their tech needs, furnishing their employees with "thousands of iPhones, iPads."
On the same floor as the legal department, the HP Archives contain some of the company's earliest and most pivotal products: audio oscillators, wrist instruments, scientific calculators, personal computers. To rally the legal department, Schultz needs to remind them of this history, Cooperman said.
"The quality of the department and its role in shaping HP are things that need to be emphasized so lawyers really feel that pride," he said. "And the general counsel also needs to display vision and a sense of where the company is going."
CHANGING OF THE GUARD
If there is anyone who understands what Schultz is up against, it may be Charnas, who served as acting general counsel after Ann Baskins resigned over the legal department's use of pretexting to spy on journalists and members of its board in an attempt to determine where leaks about the company where coming from. The furor created an avalanche of work for the legal department, Charnas said, including advising executives about the unfamiliar challenges they faced and managing regulatory filings to document leadership changes. And they were facing questions from outside the department.
"I think everyone became much more skeptical of the lawyers," said Brad Haymond, a patent attorney who worked for HP in Oregon until 2007.
Lisa LaForge, a corporate counsel who left HP in 2010, said she and her colleagues were shocked to see such a scandal rocking the company that some knew as the "boy scout of Silicon Valley."
"The company had such a long and straightforward history of doing so well," Charnas said. "It was a bit of a challenge to get the lawyers working up to speed."
