HP: Time for Hewlett to "stand down"

Hewlett-Packard urges a Delaware judge to restore "the integrity and moral rectitude" of its CEO Carly Fiorina and CFO Bob Wayman by ruling in the company's favor.

Larry Dignan
3 min read
Hewlett-Packard urged a Delaware judge to restore "the integrity and moral rectitude" of its CEO Carly Fiorina and Chief Financial Officer Bob Wayman by ruling in the company's favor.

See special coverage: A Fight to the Finish "The time has come to force Walter Hewlett and his team to face reality," HP said in its closing brief filed Saturday to Judge William Chandler of the Delaware Chancery Court. "They lost."

The brief, which was a substitute for closing arguments in a three-day trial, was released Saturday. Chandler said he would produce a ruling "very quickly" and the two parties said they expect a ruling early in the week.

Hewlett's camp didn't release its closing brief. A representative for Hewlett declined to comment.

In the brief, HP called Hewlett's evidence circumstantial at best, arguing that the lawsuit trying to overturn a March 19 shareholder vote on HP's merger with Compaq Computer is without merit.

"It is time to stand down and allow these companies to get on with the work of implementing the integration planning," HP said in its defense.

Specifically, the brief targets Hewlett's claim that HP bought the votes from Deutsche Bank. Hewlett attorney Stephen Neal did question HP Fiorina and Wayman about the Deutsche Bank issue, but tended to focus more on whether HP should have disclosed internal "value capture" reports that indicated the combined company was struggling to hit its targets.

A transcript of an HP conference call with Deutsche Bank did create a few dramatic moments in the trial Thursday, but many lawyers in attendance at the trial said it probably doesn't add up to coercion.

"The bribery/vote-buying claim is so weak that plaintiffs have gradually de-emphasized it," HP said.

On Friday, HP's annual shareholder meeting--at which Hewlett was not renominated to the board of directors--was a tame affair by comparison with the March vote and the ensuing trial.

In its brief, HP said the basis for Hewlett's complaint and the order denying the motion to dismiss was that the company concocted a lucrative, last-minute credit facility participation for Deutsche Bank to buy its vote while threatening it with a loss of business if it voted no.

"At the trial the words 'credit facility' did not pass through plaintiffs' lips," HP said. "Now, they are pitching the bribery claim as a 'circumstantial' case with the subtlety and intrigue of an Oliver Stone screenplay.

Seeking "public vindication"
"We ask for a public vindication by the chancellor, of the integrity and moral rectitude of Carly Fiorina and Bob Wayman," HP said.

In its closing brief, HP also said that Hewlett's disclosure-fraud claim "degenerated," noting that the company stuck with its initial financial targets--$2.5 billion and revenue loss attributed to the merger of 4.9 percent--throughout the proxy fight and the trial.

Neal had argued that executives had used hard revenue numbers in presentations with investors, selling the merger on the notion it would deliver revenue of $85 billion in fiscal year 2003.

HP argued any reference to specific numbers were estimates based on current analysts' projections. "No reasonable person would have thought that such illustrative 'plugs' constituted real revenue guidance," HP said.

HP also took issue with Hewlett's claim that the company's value capture reports were more than just snapshots in a planning process. Hewlett's camp argued that the reports from key business unit executives show HP may not hit its targets. HP argued that the reports show that executives were engaged in the time-honored practice of "sandbagging," or setting targets low so they can be exceeded later.

HP and Compaq executives were steadfast that the value capture reports were just the beginning in a long integration process. "Did Ms. Fiorina, Mr. Wayman, and (Compaq CFO Jeff) Clarke all perjure themselves three feet away from the chancellor?" HP asked.

HP said a ruling in favor of it on the disclosure claims would go a long way to healing the wounds caused by a tough proxy fight.

"Defendant hopes that the Court will make clear to HP's shareowners--and more important, to HP's employees--that Ms. Fiorina and Mr. Wayman have a strong, credible, good faith belief that this merger will succeed. Such a finding will begin the process of healing the damage caused by a lawsuit based on rumors, innuendo, and even a forged e-mail," the brief stated.