MicroTech Attorney: Federal Integrator's Revenue Recognition Is Not Relevant To HP Autonomy Dispute

Aaron Drabkin, the general counsel and senior vice president of contracts for federal systems integrator MicroTech, says his company's revenue recognition policies are simply not an issue in the Hewlett Packard-Autonomy legal dispute.

"It is Autonomy's revenue recognition policy that is at issue -- not MicroTech's," said Drabkin in an interview with CRN.

[Related: MicroTech Denies Involvement In Autonomy Founders' Alleged Fraud]

Drabkin's comments come with Vienna, Va.-based MicroTech being singled out -- along with a dozen other solution providers -- in what HP has called "contrived VAR transactions" by Autonomy.

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The HP accusations involving MicroTech and other solution providers came in a $5 billion lawsuit filed April 17 in the High Court in London alleging that Autonomy founder Mike Lynch and former CFO Sushovan Hussain engaged in "improper transactions and accounting practices."

Those transactions, HP alleges in the lawsuit, "misrepresented [Autonomy's] rate of organic growth and the nature and quality of its revenues, and overstated its gross and net profits."

HP refused to comment on whether MicroTech's revenue recognition policies are a factor in the HP Autonomy case.

The disputed transactions occurred before HP closed its controversial $10 billion-plus acquisition of Autonomy in October 2011. Just one year after the deal, HP took an $8.8 billion charge against earnings after what the company called discovering "serious accounting improprieties" by Autonomy.

HP is not "attacking MicroTech's revenue recognition policies," insisted Drabkin. "They are attacking Autonomy's and MicroTech has no knowledge of what Autonomy was doing in terms of its revenue recognition except from what we learned in the press."

In fact, Drabkin said, MicroTech is still an Autonomy reseller and has a "great relationship with HP as a reseller" apart from the transactions that are in dispute. "We continue to act as a reseller of their hardware and software as well as work with them on the services side," he said.

On Monday, MicroTech filed a federal lawsuit in the Northern District of California alleging breach of contract against HP's Autonomy unit.

A longtime Autonomy reseller that bills itself as a service-disabled, veteran-owned small business, MicroTech wants HP Autonomy to either return the $16.5 million MicroTech paid for the Autonomy software or deliver the software itself.

The MicroTech lawsuit against HP Autonomy is based on two instances in which MicroTech claims it paid for Autonomy software that was never delivered. Those two instances, which are among the nine listed in the HP lawsuit against Lynch and Hussain, are a June 30, 2011, $7 million sale of Autonomy software to HP itself and a $11 million March 31, 2010, sale of Autonomy software to the Vatican Library. In both cases, a sale of the software was never concluded and now MicroTech wants either $16.5 million or the Autonomy software licenses.

Lanny Davis, an attorney representing MicroTech, has vehemently denied the allegations that there were "contrived" VAR transactions involving MicroTech.

"We deny categorically the word 'contrived,' " asserted Davis. "If somebody accuses us of that, prove it, because it is false."

Besides the HP and Vatican Library deals, HP lists seven other "contrived VAR transactions" involving MicroTech in the lawsuit against Lynch and Hussain: a $9.52 million Dec. 29, 2009, transaction with DiscoverTech; a $1.8 million Dec. 31, 2009, transaction with Honeywell; a Dec. 31, 2009, $1.08 million transaction with Manufacturers Life; a $4.65 million Dec. 31, 2009, transaction with Morgan Stanley; a $4 million Dec. 31, 2010, transaction with the U.S. Department of the Interior; a $2.88 million March 31, 2011, transaction with the Bank of Montreal; and a $1.17 million March 31, 2011, transaction with Xerox Corp.

Davis, for his part, has pointed to the successful sale of Autonomy software by the end of December 2009 to blue chip clients like Honeywell, Morgan Stanley and others as evidence of MicroTech's "good faith" as an Autonomy reseller. "Each of these 2009 commercial reseller transactions was fully performed," he said.

PUBLISHED MAY 19, 2015