(Bloomberg) -- A former JPMorgan Chase & Co analyst, who’d been critical of Autonomy Corp., said that founder Mike Lynch tried to have him removed and dangled the possibility of a merger advisory role if the bank agreed.
Autonomy’s management waged a “vendetta” against Daud Khan, that culminated in Lynch offering to hire JPMorgan as an adviser on its next transaction if he was replaced, Khan told a London court Wednesday. Khan, who worked for JPMorgan’s Cazenove unit until 2011, was testifying on behalf of Hewlett Packard Enterprise Co. in its $5.1 billion suit against the British software founder.
“JPMorgan senior management did not ultimately bow to Dr. Lynch’s pressure and I remained the analyst covering Autonomy," Khan said.
The mammoth fraud lawsuit is now in its fourth week, with the court hearing how HP’s board was riven with conflict as it pursued the $11 billion Autonomy acquisition. The company wrote down the value of what was then the U.K.’s second biggest software firm by $8.8 billion just a year later.
"Dr. Lynch’s account of that meeting differs and he doesn’t accept it," said Sharif Shivji, a lawyer for the Autonomy founder. Earlier Khan was questioned about the effectiveness of the “Chinese wall” between investment banking and research. He said there were no concerns.
Khan said it wasn’t the only time JPMorgan’s investment banking group raised concerns about him. A relationship banker who covered Autonomy also suggested to him that another analyst should take over coverage of the firm, he said. JPMorgan was among the banks that later advised Autonomy on its sale to HP.
A spokesman for JPMorgan declined to comment.
The trial has focused on how Lynch and his chief financial officer Sushovan Hussain hustled to hit or exceed quarterly earnings figures. HP has argued that Autonomy artificially inflated its revenue by adding undisclosed hardware sales or booking "contrived" reseller transactions.
“The rhetoric coming from Autonomy management didn’t make sense when it came to the financial statements," Khan said.
Khan said that Lynch turned against him when he changed his recommendation on the stock at the beginning of the banking crisis. Khan and another analyst, Paul Morland, were one of a small number of analysts that were skeptical of Autonomy. Khan was temporarily banned from attending management presentations after Autonomy questioned “inappropriate" calls with fund managers.
Lynch “had a very good grasp of accounting principles," Khan said. "Mr. Hussain, by contrast, came across as shy and reserved and invariably looked to Dr. Lynch to field analysts’ questions."
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