'Toxic relationship' at HP days before buying Autonomy

A row between Hewlett Packard executives broke out just days before it announced its £8bn takeover of British software group Autonomy in 2011, with its finance chief accusing the chief executive of “corrupting the company”, a court heard on Tuesday.

Defence lawyer Robert Miles QC presented evidence of an increasingly toxic relationship between the top two executives at HP as its new chief executive, Léo Apotheker, pushed ahead with the deal, which was meant to shift the computing giant away from hardware and into the more lucrative software business.

Miles, who is representing Autonomy’s founder, Mike Lynch, in the trial in London, asked Apotheker whether he knew the chief financial officer, Cathie Lesjak, was criticising him behind his back.

“Do you recall hearing from a board meeting that Ms Lesjak said that you were corrupting the company and didn’t know what you were doing?,” Miles asked. “No I don’t,” Apotheker responded.

The former chief executive is the first to give live evidence during the civil trial launched by HP. The US group is suing Lynch for $5bn (£3.8bn) in damages.

Mike Lynch leaves the high court in London
Mike Lynch leaves the high court in London

Mike Lynch leaves the high court in London.Photograph: Henry Nicholls/Reuters

HP has accused Lynch of fraudulently inflating the value of Cambridge-based Autonomy before its £8bn takeover by HP in 2011. The allegations of “serious accounting improprieties” were first made in November 2012.

Lynch, and his former finance chief, Sushovan Hussain, deny all of the allegations in the case.

Apotheker was also presented with emails Lesjak sent to HP’s chairman, Ray Lane, ahead of an important board meeting in August 2011, days before the company was due to announce its deal to acquire Autonomy.

Lesjak told Lane: “One PR person said Léo is a dead man walking.” “Never seen worse press for a CEO,” she added. When asked by Miles what he thought about the chief financial officer “going behind your back and speaking to the chairman in this way”, Apotheker said “I wouldn’t have done that”.

Apotheker confirmed he felt blindsided when Lesjak opposed the Autonomy deal in the board meeting, and was generally furious over her conduct.

“We didn’t see eye to eye but it didn’t mean that I didn’t act towards her in a professional way … the fact that she did this behind my back, is what it is.”

Lane would later send an email to HP’s non-executive directors summarising a discussion he had with Apotheker following the disastrous board meeting.

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Lane said in the email he was shocked by Lesjak’s statement and surprised by some of Apotheker’s other announcements, including plans to shut down the device business. He said he would be relieved if HP opted to delay the takeover announcement. “We were very concerned about how poorly this announcement will be perceived and how it will reflect on Léo and the BOD [board of directors].”

But Apotheker ultimately stayed the course, and told a colleague in an email: “The captain has been screamed and yelled at and I’m now more determined than ever to prove the naysayers wrong.”

Apotheker was sacked a month later, less than a year into the job, and replaced by former head of eBay Meg Whitman.