US Attorney investigates HP-Compaq vote
(Adds expert comment, releads)
By Caroline Humer
NEW YORK, April 15 (Reuters) - Hewlett-Packard Co. (NYSE:HWP - news) said on Monday it was subpoenaed by the U.S. Attorney's Office over a shareholder vote of its proposed $19 billion takeover of Compaq Computer Corp. (NYSE:CPQ - news), 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. He has accused the company of essentially buying votes from a big investment bank.
HP denied any wrongdoing in the March 19 vote, and its shares were not impacted by news of the subpoena. HP stock rose 10 cents, or 0.6 percent, to $17.90 on the New York Stock Exchange.
``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 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 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 (DBKGn.DE) .
``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.
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.
HEWLETT LAWSUIT
After a long battle with Walter Hewlett, adissident board member who led a four-month fight against the merger, HP said it won the shareholder vote by a slim margin but would wait for a final tally to be sure.
The ballot counting has been overshadowed, however, by his lawsuit. HP has said the lawsuit is without merit.
HP 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. |
