According to documents filed with the U.S. Securities and Exchange Commission, both the U.S. Attorney's Office for the Southern District of New York and the San Francisco office of the SEC have requested information regarding Deutsche Bank's voting records. The U.S. Attorney's Office has also subpoenaed information regarding Northern Trust's voting records.
Legal experts said that the investigations are significant and somewhat unusual, although the fate of the merger is probably still in the hands of a Delaware court, which is hearing a lawsuit from merger opponent and dissident HP board member Walter Hewlett.
Last week, news organizations received copies of afrom HP CEO Carly Fiorina stating that the company might "have to do something extraordinary" to sway Deutsche Bank's and Northern Trust's votes.
Hewlett hasthat HP improperly used financial inducements to convince Deutsche Bank, a large shareholder via its Deutsche Asset Management unit, to vote in favor of the deal. He has asked a court to throw out the results of the March 19 vote, which HP claims it won.
A Delaware judge recentlythat he can pursue the suit, over HP's protests. The trial will begin April 23.
Legal analysts say the Delaware case is likely to determine whether the deal goes through, although the investigations by the government add weight to Hewlett's claims.
"The Delaware court doesn't sit in a vacuum," said Stanford Law School professor Ronald Gilson. However, the fate of the merger still likely rests in the hands of Delaware Chancery Court Judge William Chandler III, who is hearing Hewlett's lawsuit.
Gilson said the revelation of the voice mail and the subsequent government investigations give Hewlett's claims more credibility.
"That represents some movement since the initial filing," Gilson said.
The government actions are expected to take longer than it would for a merger to go through, although the government could pursue criminal or civil actions down the road if it finds enough evidence.
If the SEC were to decide it wanted to get involved before the deal's closure, though, the most likely way would be to file a brief in the Delaware case, said Rory Millson, a lawyer at Cravath, Swaine & Moore in New York.
In a statement Monday, HP executives said the company never "acted improperly."
"We remain optimistic that we can close the merger on our current schedule," the company said.
In its SEC filing, HP said the inquiry by the U.S. attorney in New York "is in response to press accounts concerning the vote on the merger proposal at the Special Meeting." It also said that the request by the SEC said it "should not be construed as an indication by the SEC or its staff that any violations of law have occurred."
A representative for the SEC declined to comment. The U.S. Attorney's Office could not immediately be reached for comment.
Frances Floriano Goins, a partner at Squire, Sanders & Dempsey in Cleveland, said that both the SEC and U.S. attorney investigations are unusual for a merger case, but said that government agencies may want to appear more active in the wake of the Enron scandal.
Nonetheless, the government actions represent a raising of the stakes in the already charged merger debate.
"If the U.S. attorney is involved, it means somebody thinks there is a criminal law issue involved," Goins said.
Stanford's Gilson said the U.S. attorney's investigation might focus more on the financial institutions than on HP. Gilson said that if either Deutsche Bank or Northern Trust was voting on shares it held for others, then they had a fiduciary duty to vote in their clients' best interests rather than in their own interests.
However, Gilson said that proving that there was enough wrongdoing to merit criminal charges would be tough.
"The facts would have to lay out awfully clearly," Gilson said.
HP, which claims to have won a sufficient number of votes to approve the merger in a March 19 meeting of shareholders, is seeking to have the Delaware court's blessing to close the deal. Meanwhile, Hewlett has refused to concede and wants the court to throw out votes cast in favor of the deal, particularly those of Deutsche Bank.
Gilson said the move also raises the stakes in another area: "It adds one (more) layer of drama," he said.