U.S. Attorney Investigates HP-Compaq
Vote
Mon Apr 15, 7:30 PM ET
By Caroline Humer
NEW YORK (Reuters) - Hewlett-Packard Co. said on Monday federal
prosecutors had issued a subpoena over a shareholder vote on its
proposed $19 billion takeover of Compaq Computer Corp. , indicating the
government has opened a criminal investigation.
HP said the U.S. Attorney's Office for the
Southern District of New York on April 10
asked for documents on voting by two large
shareholders, Deutsche Bank and Northern
Trust.
Experts said the involvement of the U.S.
Attorney's office points to a criminal
investigation and may have been sparked by a
civil suit filed by Walter Hewlett, the son of one
of the founders of the company, who has
accused HP of essentially buying votes from a
big investment bank.
Hewlett asked the court to order the vote thrown out, which management
says it won by a slim margin, although both sides are waiting for a final
tally of the count that capped a nasty 4-month proxy battle over what
would be the largest technology merger ever.
HP denied any wrongdoing in the March 19 vote, and its shares were not
impacted by news of the subpoena. HP stock rose 8 cents, or 0.45
percent, to $17.88 on the New York Stock Exchange (news - web sites),
and Compaq rose 12 cents, or 1.2 percent to $10.10.
"We never acted improperly. We remain optimistic that we can close the
merger on our current schedule," HP spokeswoman Judy Radlinsky said
in a statement.
The subpoena means a criminal investigation has been opened by the
Justice Department (news - web sites) and a grand jury has been called,
said a former assistant U.S. attorney for the Southern District. The U.S.
attorney acts as counsel to grand juries.
SEC SEEKS DOCUMENTS
HP also said it was contacted informally by the Securities and Exchange
Commission (news - web sites) about the vote, which Walter Hewlett
said was swayed by a threat by HP to hold back its substantial investment
banking business from Deutsche Bank .
"My guess is that once a public charge was made of vote buying and thus
possible fraud and corruption, there was a feeling that they needed to get
the criminal authorities involved," said the former assistant U.S. attorney,
who declined to be named.
"If nothing else, and there may be more to it than this, to satisfy the public
that the government is doing its job."
The U.S. Attorney's Office did not return telephone calls.
The move puts more attention on Walter Hewlett's lawsuit, which is set to
go to trial starting on April 23.
Samuel Thompson, professor and director at the Center for Study of
Mergers & Acquisition at the University of Miami School of Law, said
the investigations may legitimize Walter Hewlett's vote-buying allegations.
"My mother says if there's smoke there's fire. There's a lot of smoke
here, there's got to be something," he said.
But Walter Hewlett had a heavy burden of proof to establish that
Deutsche Bank was indeed influenced by Hewlett-Packard management
to change its vote, he added.
The government's inquiries represent the latest in a series of roadblocks
that computer and printer maker HP has come up against since
announcing plans to buy No. 2 personal computer maker Compaq in
September.
HP said it believed the U.S. Attorney's inquiry was in response to news
reports, which alluded to a voicemail from HP Chief Executive Carly
Fiorina.
In the voicemail, Fiorina said to Chief Financial Officer Bob Wayman that
HP "may have to do something extraordinary" to win Deutsche Bank's
and Northern Trust's votes.
HP confirmed the voicemail was authentic.
SEC REQUEST
HP also said the San Francisco office of the SEC has requested
documents and information related to the voting by Deutsche Bank and
affiliated parties. HP didn't say when it had been contacted and the SEC
declined to comment.
Walter Hewlett has alleged that Deutsche Bank, which had been one of
the underwriters in an HP credit facility the week before the vote,
changed some of its votes from a "no" to a "yes" at the last minute due to
HP management promises.
HP said on Monday defended its relation with the bank.
"We have long-standing relationships with Deutsche Bank as well as with many other institutional
shareowners. Some of them voted for the merger, others against, some split their votes, and others
changed their minds -- in both directions," Radlinsky said. |
