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Dept.:
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THIS DOCUMENT RELATES TO:
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ALL ACTIONS
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SUSHOVAN HUSSAINS RESPONSE TO THE PARTIES FOURTH PROPOSED SETTLEMENT;
RENEWED MOTION TO INTERVENE
Case No. 3:12-cv-6003-CRB
898374
Over the past six months, HP and the Individual Defendants have tried four times to
hasten unfair, collusive settlements through this Courteach new amendment making only the
bare minimum adjustments.1 Yet, even in its latest iteration, the proposed settlement still seeks to
squeeze through a so-called complete bar order, which purports to strip non-partieslike
page 93 of an exhibit to their latest filing, the parties purport to permanently bar and enjoin
any and all persons from ever commencing any counter-claim, under any law, however
styled, that in any way seeks to hold the Individual Defendants accountable for their role in the
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Their goal is clear: they hope never to answer for their mismanagement of the Autonomy
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acquisition and their own securities fraud. As the parties settlement talks have dragged on, it has
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become increasingly clear that HPs public explanations for its bungled Autonomy acquisition
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were themselves demonstrably false and misleading. In late 2012, desperate to explain the
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$8.8 billion write-down, Ms. Whitman told analysts that the majority of the impairment charge
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misrepresentations.2 Ms. Whitman knew at the time that that claim was untrue. HPs own
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internal documents, as well as documents filed by HP in this proceeding, show that the write-
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down was actually based on differences between GAAP and IFRS accounting rules, accounting
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judgment calls, allegedly lost synergies, and HPs diminished market capitalizationnot fraud.
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Indeed, when HP analyzed every major Autonomy transaction during the relevant time period
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This time, the parties assure us, their revised proposal is fair, reasonable and adequate.
Dkt. 277 (Motion for Prelim. Approval) at 18. Of course, they have made that promise before.
See, e.g., Dkt. 149 at 2 (assuring this Court that the first proposalthrough which Plaintiffs
counsel stood to earn up to $48 millionwas unquestionably fair, reasonable, and
adequate.) (emphasis added); Dkt. 224 at 5 (describing staggeringly broad proposed releases
as eminently fair and reasonable); Dkt. 243 at 1 (describing revised, and subsequently rejected,
releases as narrower than the norm, appropriate and fair, and supported by fair and valuable
consideration).
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See Transcript of Hewlett-Packards Q4 2012 Earnings Conference Call, available at
http://online.wsj.com/public/resources/documents/hppdf112012.pdf (Earnings Call) at 5; see
also Dkt. 222 (Hussain Suppl. Brief re Aug. 25 Hearing) at 89 (discussing HPs long history of
covering up its own mismanagement of the Autonomy acquisition by shifting blame to others).
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SUSHOVAN HUSSAINS RESPONSE TO THE PARTIES FOURTH PROPOSED SETTLEMENT;
RENEWED MOTION TO INTERVENE
Case No. 3:12-cv-6003-CRB
898374
the results of which it used as the starting point for calculating the write-downit identified
less than $8.5 million in revenue that it could confirm as being non-compliant with IFRS rules.
principles to strip Mr. Hussain of his legal rights in a proceeding to which he is not a party. In
essence, HP and the Individual Defendants are trying to give Mr. Hussains house away while he
is at workand then telling him he has no say in the matter when he asks what theyre doing.
Unfortunately for those rushing to settle this case, Mr. Hussains legal rights here are as plain as
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collusive settlement4now renews his motion to intervene to challenge the latest proposal and its
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I.
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the parties Complete Bar Order was alarmingly and unconstitutionally broad: it appeared to
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seek to bar Mr. Hussain, in the future, from asserting any counterclaims or other claims, for
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indemnity, contribution or otherwise, against HP or its officers or directors in any future
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litigation. Dkt. 160 (Hussain Mot. to Intervene) at 4.
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In response, HP did several remarkable things:
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First, where the language of the Bar Order itself was opaque, HP conceded the breadth of
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There are other problems with the parties revised settlement proposal. It remains a nonmonetary settlementthe kind that Ralph Ferrara encourages courts to scrutinize because of
the danger that [they] may be the result of collusion between the individual defendants and
the plaintiffs counsel. Ralph Ferrara, Shareholder Derivative Litigation, 14.05[2][a] (2d ed.
2014) (collecting cases rejecting settlements involving cosmetic reforms and no monetary
payment). And it is still plagued by a woefully unbalanced quid pro quo: HPs directorsthe
parties who stand to benefit the most from the broad releasesare contributing nothing yet
would receive a free pass for the role that they played in destroying the value of Autonomy and a
free pass for the false and misleading statements they made to the market.
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Although Vincent Ho moved to intervene four days before Mr. Hussain did, he did so only for
the limited purpose of filing a motion for an award of attorneys fees. Dkt. 157. Since then,
Mr. Ho appears to have got what he wanted: some $870,000 in fees and costs. See Dkt. 277-2 at 5
(Amended Notice of Proposed Settlement) (explaining that Judge Walker awarded Hos counsel
$850,000 in attorneys fees and $19,724.22 in expenses).
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SUSHOVAN HUSSAINS RESPONSE TO THE PARTIES FOURTH PROPOSED SETTLEMENT;
RENEWED MOTION TO INTERVENE
Case No. 3:12-cv-6003-CRB
898374
its proposed releases. In its opposition brief, HP acknowledged that the proposed injunction
sought to ban Mr. Hussain from filing counterclaims or other claims if and when HP blamed
him for the Individual Defendants botched acquisition of Autonomy. Dkt. 165 at 5.
Second, in order to protect the Individual Defendants, HPs lawyers used the company as
a shield. In response to Mr. Hussains motion, HP shaved its proposed order back, explaining
that it would no longer enjoin claims by Legacy Autonomy Officials against the
Company. See Dkt. 165 at 6 n.6 (the settling parties agreed to modify the proposed
adjustmentsor any adjustments at allto those claims involving the Individual Defendants.
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Third, at the August 25 preliminary approval hearing, HPs lawyers acknowledged under
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pressure that the Bar Order was specifically intended to protect HPs directors and officers from
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Mr. Hussain. Mr. Hussain says, Yes, I may be liable to H-P for
$8 billion, but I really think Meg Whitman mismanaged the
company, and she should be she should contribute to the
judgment against me. That lawsuit is barred.
Hearing Tr. (Aug. 25, 2014), 48:1549:4 (emphasis added).
But the law is clear: HP cannot negotiate Mr. Hussains rights away in litigation and
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settlement talks to which he is not a party. Ortiz v. Fireboard Corp., 527 U.S. 815, 846 (1999)
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(citing Hansberry v. Lee, 311 U.S. 32, 40 (1940)) (One is not bound by a judgment in personam
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in a litigation in which he is not designated as a party or to which he has not been made a party by
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service of process.); Alvarado Partners LP v. Mehta, 723 F. Supp. 540, 554 (D. Colo. 1989)
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(Fundamental due process principles prohibit claim extinguishment against anyone not a party to
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SUSHOVAN HUSSAINS RESPONSE TO THE PARTIES FOURTH PROPOSED SETTLEMENT;
RENEWED MOTION TO INTERVENE
Case No. 3:12-cv-6003-CRB
898374
this action.).5
And, to the extent HP tries to do so, Mr. Hussain is entitled to intervene to protect his
interests.6 As HP itself concedes, non-settling defendants are not expected to stand idly by while
a proposed settlement strips [them] of a legal claim or cause of action, such as a cross-claim for
contribution or indemnification. Dkt. 165 (HPs Opp. to Hussain Mot. to Intervene) at 4 n.4
(citing Bhatia v. Piedrahita, 2014 WL 2883924, at *3 (2d Cir. June 26, 2014)).7 What is a
lawsuit against Meg Whitmanseeking, in Mr. Wolinskys words, contribut[ion] for her role in
HP has no real answer to these basic propositions. It hints at, but cannot quite bring itself
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to make, an argument that the proposed Bar Order does not constitute formal legal prejudice to
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Mr. Hussain because it applies only to the extent that Hussain seeks to hold others responsible
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for the losses that he caused. See generally Dkt. 165 at 5. In fact, the Bar Order is broader
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than HP would have this Court believe: it purports to relate not only to the losses that [Hussain]
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caused, but to all losses that HP alleges him to have caused.8 Thus, the greater the losses HP
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alleges Mr. Hussain to have caused, the greater the impactand the prejudiceof the Bar Order.
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Next, HP argues that Mr. Hussain should be satisfied with a vague judgment credit that
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corresponds to the percentage of responsibility of the applicable Releasee(s) for the loss to the
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Here, Mr. Hussains right to intervene is even more important than it would otherwise be:
although he is a non-party (whose rights cannot be negotiated away), he is also a shareholder.
While HP expediently disputes Mr. Hussains shareholder status today, see generally Dkt. 210 at
1718, it may well argue later thatas a shareholderhe was on notice of this settlement and
should therefore be bound by it. See also Dkt. 160 (Hussain Mot. to Intervene) at 5 (discussing
potential argument that Mr. Hussain, as a shareholder, could also be barred by the broad
shareholder release provisions of the proposed settlement).
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See generally Dkt. 160 (Hussain Mot. to Intervene) at 56; Dkt. 170 (Hussain Reply ISO Mot.
to Intervene) at 1012; Dkt. 209 (Hussain Suppl. Brief) at 69.
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See also Waller v. Fin. Corp. of Am., 828 F.2d 579, 582 (9th Cir. 1987) (noting that prejudiced
third party has standing to intervene and to object because without intervention [its] capacity to
effectively defend its interests would be both impaired and impeded).
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Whether intentionally or accidentally, HP omits the word alleged from its synopsis. What
matters, though, is the extract HP quotes from the Bar Order (which, by its own terms, applies
only if Hussain advances claims where [his] alleged injury is [his] alleged liability to the
Company), not HPs summary (In other words, it applies only to the extent that Hussain
seeks to hold others responsible for the losses he caused to HP.). See generally Dkt. 165 (HP
Opp. to Hussain Mot. to Intervene) at 5 (emphasis added).
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SUSHOVAN HUSSAINS RESPONSE TO THE PARTIES FOURTH PROPOSED SETTLEMENT;
RENEWED MOTION TO INTERVENE
Case No. 3:12-cv-6003-CRB
898374
Company or Autonomy.9 Dkt. 165 at 5. But, in so doing, HP repeatedly relies on cases that are
distinct in two meaningful ways. First, they involve non-settling defendants, not third-parties like
Mr. Hussain. Second, in the cases cited by HP, the settling defendants actually contributed
significantly to the settlementunlike the settling parties here. In HealthSouth, for instance, the
settling defendant paidand, therefore, the minimum judgment credit due to the non-settling
defendants amounted to$445 million. In re HealthSouth Corp. Sec. Litig., 572 F.3d 854, 861
(11th Cir. 2009). Here, in contrast, the Individual Defendants are not contributing a cent between
them.
Finally, realizing the weakness of these arguments, HP claims that the Bar Order is
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ultimately immaterial. Under English law, HP argues, the claims at issuefor contribution
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from HPs directors for their role in the acquisitionare unavailable to Mr. Hussain. Dkt. 222
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at 12 (discussing Dkt. 210 at 22). If that were true, Mr. Hussain has pointed out, HP could simply
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eliminate its immaterial Bar Order, which would simultaneously diminish Mr. Hussains need
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to intervene and simplify this Courts task. Unsurprisingly, HP has not taken Mr. Hussain up on
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this invitation.
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problem. HP has publicly announced, both in this Court and in the press, that it intends to sue
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Mr. Hussain in the United Kingdom. It is now clearer than ever that Mr. Hussain will need to
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prepare and file counter- and cross-claimsincluding claims for contribution and direct claims
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for damage caused by the defendants fraudulent misrepresentationsagainst both HP and the
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Individual Defendants. And, as those claims become increasingly relevant, so the evidence of the
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It is clear that HP thinks that this judgment credit is worthlessthat is, that the percentage of
responsibility attributable to the Individual Defendants is zero. As Mr. Hussain has previously
noted, Whitman, Apotheker, and the other defendants have refused to acknowledge any
wrongdoing or pay any money. See, e.g., Dkt. 149-2 (Stipulation) at 2 ([T]he Board resolved
that there is no merit to the claims asserted against the named defendants in these actions); id.
at 3 ([T]he Settling Individual Defendants expressly deny all assertions of wrongdoing or
liability arising out of the allegations in the Federal Action, the State Actions, any other
shareholder derivative actions or the shareholder demands.).
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SUSHOVAN HUSSAINS RESPONSE TO THE PARTIES FOURTH PROPOSED SETTLEMENT;
RENEWED MOTION TO INTERVENE
Case No. 3:12-cv-6003-CRB
898374
II.
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The parties fourth attempt at a settlement agreement not only attempts to strip
Mr. Hussain of his right to defend himself and assert his rights, it also seeks to shield the
improper and fraudulent actions of HP and the Individual Defendants from further, much-needed
scrutiny. The Court should not countenance this effort to whitewash the fraudulent conduct of
HP and the Individual Defendantsparticularly in light of the entirely illusory value returned to
the companys shareholders under the proposed settlement.
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There is abundant evidence, including evidence already available in the public record, to
show that HP and the Individual Defendants made materially misleading statements to the market
regarding the reasons for the companys November 20, 2012 write-downstatements that falsely
and inaccurately pointed the finger at Mr. Hussain and other former members of Autonomys
management in an effort to divert attention from HPs and the Individual Defendants failures.
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Specifically, on November 20, 2012, Ms. Whitman attributed the majority of [the $8.8
billion] impairment charge to serious accounting improprieties, disclosure failures and outright
misrepresentations.10 The same day, HPs CFO, Catherine Lesjak, claimed that over $5
billion of the write-down was due to accounting improprieties, disclosure failures, and
misrepresentations.11
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These statements are false and have caused damage to Mr. Hussain.
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The evidence will show that, at the time HP announced its write-down, HP had not turned
up $8.8 million in fraud, much less $8.8 billion. As detailed in the Independent Committees
Resolution, prior to announcing its write-down, HP undertook a Rebasing Exercise to evaluate
how the allegedly fraudulent transactions affected Autonomys past financial performance, which
it used as the starting point for calculating its write-down.12 In conducting the Rebasing
Exercise, HP reviewed every Autonomy transaction worth more than $1 million, removed certain
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SUSHOVAN HUSSAINS RESPONSE TO THE PARTIES FOURTH PROPOSED SETTLEMENT;
RENEWED MOTION TO INTERVENE
Case No. 3:12-cv-6003-CRB
898374
transactions from Autonomys past revenue results, and then categorized those transactions
according to whether they were confirmed as not complying with IFRS accounting rules,
probabl[y] not compliant with IFRS, or removed on the basis of management judgment/US
GAAP difference. Contrary to the public statements of Ms. Whitman, Ms. Lesjak, and others,
HPs Rebasing Exercise attributed much of the reduction of Autonomys value to differences
Furthermore, the Independent Committees Resolution concedes that the majority of the
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write-down was caused by factors having nothing to do with Autonomys former management,
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Independent Committee admitted that $5.3 billion of the write-down was attributable to a loss
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of originally projected synergiesnot fraud.13 Second, the Committee admitted that $3.6
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billion of the write-down was attributable to a change in the discount rate that HP used to
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calculate Autonomys value in November 2012, which change was required due to the precipitous
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decline in HPs market value in August 2012 after it announced an $8 billion write-down related
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to its failed acquisition of Electronic Data Systems.14 Together, the amount attributed to lost
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synergies and the change in the discount rate account for $8.9 billion (i.e., the actual majority) of
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The Independent Committee admitted that HPs auditors Ernst & Young could not confirm that
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the majority of the write-down was due to fraud as claimed by Ms. Whitman and Ms. Lesjak
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and thus removed that characterization from the companys Form 10-K.16 The Committee then
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resorted to creative wordsmithing to make their statements appear less blatantly false, writing that
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Id. at 45.
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Id. at 2, 45.
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This alleged $14.9 billion loss is based on HPs $17.1 billion valuation of Autonomy. See
generally id. at 33; see also id. at 45; Dkt. 222 (Hussain Suppl. Br.) at 78.
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Resolution at 47.
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SUSHOVAN HUSSAINS RESPONSE TO THE PARTIES FOURTH PROPOSED SETTLEMENT;
RENEWED MOTION TO INTERVENE
Case No. 3:12-cv-6003-CRB
898374
[t]he Company qualitatively estimated that the majority of the charge related to accounting
In addition to falsely attributing Autonomys lost value to fraud, HP and its executives
also falsely claimed that Autonomys management concealed information from its auditor
Deloitte and falsely claimed not to have been aware of the types of transactions that Autonomy
entered into prior to the HP acquisition. For example, Ms. Whitman referred to mistakes and
outright misrepresentations that a full time auditor of the stature of Deloitte didnt catch.18
Likewise, HPs General Counsel John Schultz accused Autonomys former management of
active concealment, claiming that Deloitte obviously didnt catch these issues at the time.19
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These statements are false and have likewise harmed Mr. Hussain.
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The evidence will ultimately show that, in every quarter during the relevant period,
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Deloittes reports to the Audit Committee of Autonomys Board of Directors discussed the types
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fraudulent. Upon acquiring Autonomy, HP had access to these reports and thus well knew that
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Autonomy had not misled Deloitte; to the contrary, HP knew that Deloitte had given careful
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The evidence will also show that HP was itself well aware of the transactions about which
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it publicly claimed to have been deceived. For example, in its November 20, 2012 press release,
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certain strategic customers.20 Since then, however, HP has admitted that both KPMG and
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Ernst & Young highlighted Autonomys hardware sales more than a year earlier, and yet HP did
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898374
not cry fraud! until after it was clear that it had mishandled the acquisition.21 Likewise, internal
emails will show not only that HP was aware of Autonomys practice of recognizing revenue
upfront on certain hybrid hosted transactions, but that HP concluded that such revenue was
III.
CONCLUSION
The statements of Ms. Whitman and others that HPs write-down was based on
accounting fraud by Autonomys former management were false, were plainly designed to divert
blame for HPs botched acquisition of Autonomy, and have caused great and unwarranted
damage to Mr. Hussain. Indeed, HPs and Ms. Whitmans statements constitute a far greater
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fraud than anything alleged against Autonomy, Dr. Lynch, or Mr. Hussain. There is no reason the
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Court should bar Mr. Hussain from pursuing his legal rights against HP and the Individual
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Defendants, much less grant the Individual Defendants a free pass on the fraud they have
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perpetrated.
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For the foregoing reasons, the Court should once again deny preliminary approval to the
parties proposed settlement and grant Mr. Hussains motion to intervene.22
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By:
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Resolution at 3940.
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Mr. Hussains specific requested relief is set out in previous filings. See, e.g., Dkt. 209
(Hussain Suppl. Brief) at 13; Dkt. 222 (Hussain Suppl. Reply Brief) at 15.
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SUSHOVAN HUSSAINS RESPONSE TO THE PARTIES FOURTH PROPOSED SETTLEMENT;
RENEWED MOTION TO INTERVENE
Case No. 3:12-cv-6003-CRB
898374