Hewlett-Packard Co. (HPQ) was given a January deadline to complete an internal review of investors’ securities fraud claims over its acquisition of Autonomy, which contributed to an $8.8 billion writedown.
A review by a three-member committee of independent directors must be completed, and the full board must vote on its recommendations, by Jan. 17, U.S. District Judge Charles Breyer in San Francisco today told company lawyers.
The judge put a shareholder lawsuit on hold until that date over objections by attorneys for investors who claim the committee is dragging its feet. Shareholders also said the company’s assertion that Autonomy defrauded it means the board is unlikely to join investor claims that Hewlett-Packard botched the acquisition and misled them.
“I want the investigation to have been completed to the point where the committee would make a recommendation to the board, and I want the board to have acted on it,” Breyer said.
Hewlett-Packard is facing the shareholder lawsuit in federal court, three similar suits in state court and eight shareholder demands related to the Autonomy acquisition, said Ralph Ferrara, a partner at Proskauer Rose LLP who is advising the committee, which has met five times and is meeting again in two weeks.
The committee has talked to 25 individuals, including detailed discussions with those who might have been expected to invoke their Fifth Amendment right not to testify, Ferrara said at the hearing. None of those interviewed had invoked their right, he said.
Another 30 individuals may be interviewed, including former Autonomy executives, and some interviews should be finalized within the next two weeks, he said.
“This is not a futile exercise. This is not a game,” Marc Wolinsky, Hewlett-Packard’s attorney, told the judge after shareholder attorney Joseph Cotchett said the company had investigated the Autonomy acquisition more than a year ago. “The company has to weigh very serious alternatives.”
After the investigation is complete, the committee will recommend whether to seek dismissal of investors’ claims or join the lawsuit, according to court filings.
“I can guarantee you that on Jan. 20, you will receive a motion to dismiss,” shareholder attorney Cotchett told Breyer.
Hewlett-Packard, the largest personal computer maker, acquired the U.K.-based software maker for $11 billion in 2010. It alleges it was a victim of fraud because Autonomy overstated its revenue growth and prospects. Autonomy’s ex-chief executive officer, Michael Lynch, has denied Hewlett-Packard’s claims and said the company mishandled the purchase.
The U.S. Justice Department and the U.S. Securities and Exchange Committee are investigating the company’s claims, Hewlett-Packard has said.
The case is In re Hewlett-Packard Co. Shareholder Derivative Litigation, 12-6003, U.S. District Court, Northern District of California (San Francisco).
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