HP accounting chief resigns following Autonomy debacle

HP accounting chief resigns following Autonomy debacle

Summary: The chief executive of accounting at Hewlett-Packard has resigned, but has the failed Autonomy buyout demanded the sacrifice?

TOPICS: Hewlett-Packard

Hewlett-Packard's accounting chief plans to step down after coping with the HP's $8.8 billion writedown following the purchase of Autonomy.

According to The Associated Press, Marc Levine, senior vice president and principal accounting officer of the tech giant has resigned and will step down from his post on November 1. Regulatory filings state that Levine, who took on his accounting post in March last year, resigned on September 18.

Levine has worked at Hewlett-Packard since 1988.

HP acquired British firm Autonomy for $11.1 billion in 2011. The tech giant was forced to take an $8.8 billion writedown in its fourth quarter earnings report last year due to the acquisition. The Palo Alto, Calif., company said that it was a victim of multibillion dollar fraud, writing within its earnings report:

"The majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation plc that occurred prior to HP's acquisition of Autonomy and the associated impact of those improprieties, failures and misrepresentations on the expected future financial performance of the Autonomy business over the long-term."

Former CEO Leo Apotheker planned to make HP more of a software-based company, but the problem was that Autonomy apparently used hardware sales to bump up the balance sheet.

While HP CEO Meg Whitman is now stuck with the deal -- which proved to be a bust and embarrassment to the company, as well as a knife in the side of shareholders -- Apotheker said that "the due diligence process was meticulous and thorough, and included two of the world’s largest and most respected auditing firms working on behalf of HP."

"Much of the process relied on public financial reports -- accounting statements approved, filed and backed by Autonomy's leadership, board and auditors. It's apparent that Autonomy's alleged accounting misrepresentations misled a number of people over time -- not just HP's leadership team, auditors and directors. In fact, the alleged improprieties apparently came to light only after an internal whistleblower raised the issue."

In response, Autonomy said that HP's allegations are false, and the British firm was not bought under false pretenses. Autonomy's former chief executive, Mike Lynch, claimed that HP "botched up handling" of the deal.

These defenses make what actually happened fuzzy, but either way, HP shareholders are still seething. Levine, as a member of the accountancy department, may take some of the blame for the botched-up acquisition, or he may simply be the latest head placed on a pike to soothe the ire of investors.

Whitman, Apotheker, former HP chairman Ray Lane and Lynch are being taken to court by angry shareholders over the "vastly overvalued" deal. Hewlett-Packard Chairman Ray Lane gave up his post, joining chairmen John Hammergren and G. Kennedy Thompson in boardroom exile. 

Topic: Hewlett-Packard

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  • Meticulous due diligence? HA!

    According to a piece in the September Yale Alumni Magazine, Jim Chanos, famed short seller who called Enron, had put together a report on Autonomy a few weeks before the HP bid that called Autonomy's COO "unqualified", its market share and growth numbers questionable, financial disclosures very poor and its margin profile suspiciously high. And Mr. Chanos put his money where his mouth was, with a large short of Autonomy stock.

    He passed the report on to someone with friends on the board of HP saying it was going to be a disaster - but the deal went through anyway. Now if an outside guy looking at public records and talking to customers could figure that out, why couldn't people looking at the company's books do the same?

    Because they were told not to? I've been on a couple of due-diligence teams that got overruled by corporate with disasterous results. A fiasco this big is almost certainly due to internal interference by execs eager to "get the deal done." And it is unlikely that Mr. Levine pulled the trigger. More execs will walk the plank but the real responsibility is with the board members who signed off on the deal.
    R Harris
  • HP Shareholders are always victims

    $11 Billion Dollars. Who were two of the world’s largest and most respected auditing firms working on behalf of HP on merger with Autonomy?
    Great lesson to learn from Jim Chanos: smart top people always have their own agenda, do not waste your time to make any suggestion, benefits from their ignorance.
    Either way, shareholders and taxpayers are always the victims.
  • Credible Journalism?

    The 'journalist' who wrote this piece cites an AP piece that basically quotes an SEC form 8-K filing that states Levine is resigining as of Nov 1. The second paragraph mentions the Autuonomy acquisition and subsequent writedown. Is this what she is using to link Levine's resignation as due to the Autonomy debacle?
    If more due diligience would have been performed, said 'journalist' would have found out that Mr Levine has taken the CFO position at JDA Software. Perhaps Mr Levine did not see a future at HP as HP's CFO; who claims to have said no to the Autonomy deal, (but seems to not have fought very hard for that position) is not looking to leave soon. The more troubling picture would be all the finance staff members (Jim McMullen-Treasurer, Jeff Boldt-EVP Enterprise Group and now Marc Levline-contoller) have jump ship in the past year.
    Do they know something we don't?