FRC stops Autonomy CFO complaint pending US appeal
The Financial Reporting Council (FRC) has temporarily halted its formal complaint against Sushovan Hussain, the former chief financial officer (CFO) of Autonomy Corporation, pending the outcome of his intended appeal against his conviction on 16 counts of fraud in a US court
27 Nov 2018
In May the regulator announced formal complaints in relation to members of Autonomy’s senior finance team and its auditor, Deloitte, following an investigation into the company’s financial reporting between 1 January 2009 and 30 June 2011.
The software company became embroiled in allegations of accounting irregularities connected to revenue recognition figures used in its $11bn (£8.6bn) acquisition by Hewlett-Packard (HP) in 2011. The US tech giant wrote down $8.8bn (£6.9bn) the following year, of which $5bn (£3.9bn) related to alleged accounting irregularities and alleged misrepresentation of how software rental and acquisitions were shown.
In its interim order authorising the stay of the complaint against Hussain, the FRC said that in April, he was convicted in the US district court for the northern district of California on 16 counts of fraud. Each of these would constitute criminal offences in the UK, and so are sufficient to mean that a disciplinary tribunal would automatically find he had committed misconduct.
However, Hussain’s lawyers have informed the FRC that he intends to appeal against his convictions. The deadline for doing so is 20 December, and the process is expected to take around 18 months from that date.
As result, Hussain has consented to an order suspending him from ICAEW membership until the formal complaint against him can be heard, which will be once his appeal is settled. In the event his US court appeal is unsuccessful, and he does not overturn all the convictions for dishonesty, the former CFO has agreed he will consent to an order excluding him from being an ICAEW member.
The FRC’s formal complaint against Hussain alleges misconduct, on the grounds he lacked integrity or was incompetent when preparing Autonomy’s annual reports and accounts for the financial years ended 31 December 2009 and 2010 because the accounting treatment of the company’s purchase and sales of hardware, and the way in which it accounted for transactions with third party retailers.
Hussain was also alleged to have made false or misleading statements in a meeting with the financial reporting review panel (FRRP) in January 2010 and in a letter to the FRRP in March 2011.
The FRC said the other formal complaints in relation to Autonomy it announced in May are unaffected by the stay actions involving Hussain.
FRC stay order is here.
Report by Pat Sweet