In a massive fall from grace for a man once crowned finance director of the year, Autonomy’s former chief financial officer and ex-Darktrace director Sushovan Hussain has been found guilty of fraud by a San Francisco court.
As part of a long-running criminal court battle that will shortly be replicated East of the Atlantic in the London civil courts, Hewlett Packard alleged that, prior to its $11bn acquisition of Autonomy in 2011 – part of its concerted effort to move into the software industry – senior Autonomy managers inflated the company’s financial position.
Meg Whitman, HP’s former chief executive officer, claimed that Autonomy’s management had created false transactions to overstate the company’s performance, and in 2012 HP wrote off $5bn, blaming serious accounting irregularities.
A 12-member federal jury this week agreed, convicting Hussain of 16 counts of wire and securities fraud. The verdict precedes a $5.1bn civil suit brought by HP in the UK against Hussain and Autonomy’s founder and former CEO Mike Lynch, scheduled to begin next year. Lynch is counter-suing for $160m, claiming lost investment opportunities due to reputational damage. He has strongly rejected HP’s claims that management misled HP over the company’s value.
Hussain, who in 2010 was crowned Finance Director of the Year at the ICAEW and CBI-backed FDs’ Excellence Awards, was in February 2015 appointed as a director of cyber defence company Darktrace – a company backed by Lynch’s investment vehicle Invoke Capital and which counts law firms including Sackers and Irwin Mitchell among its clients. However, that appointment came to an end in November 2016; around the time Hussain was charged with fraud.
Hewlett-Packard split into two companies in 2015— Hewlett Packard Enterprise (HPE) and HP Inc.—with HPE eventually selling off parts of Autonomy. The latter company issued a statement on Monday (30 April) saying: “HPE is pleased with the verdict. As we have consistently maintained, Mr Hussain engaged in outright fraud and deliberately misled the market about non-existent sales through a series of calculated sham transactions.
“Autonomy manipulated their revenue, and quarterly results, making an accurate valuation impossible. That Mr Hussain attempted to depict the fraud as nothing more than a misunderstanding of international accounting rules was, and still remains, patently ridiculous – and the jury has now held him accountable for his role in defrauding HP.”
Hussain’s lawyer, John Keker, said he was disappointed with the verdict and intends to appeal.
The UK’s Serious Fraud Office dropped its own investigation into Autonomy in 2015 after concluding it had “insufficient evidence for a realistic prospect of conviction”.