Friday, May 31, 2013

TRUTH STRANGER THAN FICTION


Just when I thought we'd get May ended 'safely' this story gets posted:

May 31, 2013, 1:09pm PDT

In HP-Autonomy lawsuit, auditors Deloitte, KPMG out of gunsights

Reuters
Auditors KPMG and Deloitte have been quietly dropped from the legal fight over the acquisition of Autonomy, which puts more onus on the board and Meg Whitman to explain how they missed the alleged fraud that led to an $8.8 billion writedown.





Technology Reporter-Silicon Valley Business Journal

When Hewlett-Packard Co. shareholders in November sued the company and its directors over the disastrous acquisition of Autonomy Corp., the company’s auditors,Deloitte and KPMG, found themselves dragged into the mess as defendants.
What has largely escaped notice is that a May 3 consolidated complaint in the shareholders derivative case droppedKPMG LLP and Deloitte Touche Tohmatsu Limited as defendants, refocusing the case on the company’s management and board.
That’s interesting, given that CEO Meg Whitman in a Nov. 20 earnings call with analysts made a point of placing attention on the role of the auditors in the purchase of the British software firm, which led to an $8.8 billion writedown for HP. Whitman served on the board when it approved the purchase.
“What I will say is the board relied on audited financials, audited by Deloitte, not brand X accounting firm but Deloitte,” Whitman said in the call. “And by the way, during our very extensive due diligence process, we hired KPMG to audit Deloitte, and neither of them saw what we now see after someone came forward to point us in the right direction.”
She didn’t indicate the identity of that “someone” in analyst call.
With the auditors out of the case, Whitman and the board are left to explain their own actions in the Autonomy derivative suit. It also removes a cloud over the auditors. Auditing firms in past corporate disasters have taken the fall when they have been involved in massive mistakes or misdeeds, for example Arthur Andersen’s demise after Enron’s 2001 unraveling.
“To the extent that the light is no longer shining on KPMG, this puts greater pressure on HP’s board and management to take responsibility for this train wreck,” said Stephen Diamond, associate professor of law at Santa Clara University. “When you go to buy a company, you have an obligation as a director to make sure that the purchase is worth how much you pay for them.”


While Whitman has more than doubled HP’s stock price since the writedown, shareholder ire over the Autonomy messhas already shaken HP. Longtime HP Chairman Ray Lane stepped down in April, followed by the exit of John Hammergrenand G. Kennedy Thompson from the board.
Mark Molumphy, a lawyer representing shareholders in the suit, confirmed in a phone call that KPMG and Deloitte are no longer defendants. He didn’t respond to follow up calls seeking comment as to why the auditors are no longer in the crosshairs. HP declined to comment. A spokesperson from KPMG confirmed that the firm was no longer involved in the case. Deloitte didn’t return multiple calls seeking comment.
The shareholder suit claims that HP’s board failed to adequately review Autonomy’s finances before buying the British software maker. The purchase closed while Palo Alto-based HP, the world’s biggest maker of personal computers, was run by former CEO Leo Apotheker.
In a May 7 story that appeared in the U.K. publication The Guardian, HP commented on the case: "As we have continually said, HP relied on the audited financial statements and the representations of Autonomy's management and its auditors regarding Autonomy's business and revenue."

1 comment:

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