Fraud Trial of Former Autonomy CFO Kicks Off With Competing 'Cadillac' Metaphors
The federal criminal trial of former Autonomy CFO Sushovan Hussain will undoubtedly be heavy on accounting jargon and financial details as it unwinds over the next couple of months in District Judge Charles Breyer's courtroom.
February 26, 2018 at 05:01 PM
3 minute read
The original version of this story was published on The Recorder
SAN FRANCISCO — The federal criminal trial of former Autonomy CFO Sushovan Hussain will undoubtedly be heavy on accounting jargon and financial details as it unwinds over the next couple of months in U.S. District Judge Charles Breyer's courtroom.
But at opening arguments Monday, lawyers on both sides of the case leaned on simple automotive metaphors to describe the ill-fated 2011 deal at the heart of the case where Hewlett-Packard acquired Autonomy for $11 billion.
During a methodical and low-key presentation for the government, Assistant U.S. Attorney Robert Leach said Hussain “dazzled” and “deceived” leaders at Hewlett-Packard into paying $11 billion, or what Leach called “a Cadillac offer for what was really a Pinto.” HP announced an $8.8 billion write-down of Autonomy's value in 2012, and claimed that more than $5 billion of that amount was due to accounting irregularities and misrepresentations by Autonomy.
In response to the government's opening, Hussain's lead defense lawyer, John Keker of Keker, Van Nest & Peters, said it was HP that squandered Autonomy's value via mismanagement after the deal. “Autonomy the Cadillac had been turned into a Pinto by Hewlett-Packard,” said Keker, flipping Leach's metaphor on its head.
Hussain's fate will turn on whether jurors buy Keker's explanation of the two years leading up to the HP deal, or the prosecutors'.
During the government's opening, Leach said that “for Mr. Hussain revenue was everything.” Leach said Hussain pushed Autonomy's sales and finance teams to do everything they could to beat the consensus revenue projections expected in the market. That, according to the government, included back-dating sales contracts to make sure revenue was recognized in certain quarters and using deals with third-party resellers to make it appear that Autonomy's sales were more robust than they actually were.
Leach also claimed Hussain helped sell Autonomy as a high-margin “pure software” company even though 10 percent of its revenue came from low-margin hardware sales, often done at a loss to Autonomy just to book revenues.
“Ladies and gentlemen, this is a case about lying and cheating,” Leach told jurors. “Ultimately, [Hussain] misled HP and its shareholder, who were the ones left holding the bag while he walked away with millions.”
Keker, meanwhile, laid out a starkly different view of the case against his client. Hussain, he pointed out, was the only person charged criminally in a case where the “goliath” HP, which had $127 billion in annual revenue at the time of the Autonomy deal, claimed it was deceived by the smaller company.
“Hewlett Packard's attempt to turn a failed merger into a crime will not succeed,” Keker said.
Keker told jurors that many of the government's witnesses were offered immunity to testify, and that Christopher Egan, the former chief executive of Autonomy's U.S. subsidiary, entered into a deferred prosecution agreement. Keker said many of the government's witnesses from the Autonomy side of the merger initially said they did nothing wrong, but changed their tune under pressure from prosecutors.
Keker said it's up to jurors to decide “whether or not these immunized witnesses are trustworthy and whether they can be and should be believed.”
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