HP's recent acquisition of governance and testing software vendor Mercury
could yet result in fresh legal headaches for the company after it revealed last
week that it has received a request from a Senate panel for information on
Mercury's past stock option and executive compensation policies.
In a regulatory filing, HP said that it had received the request from a
subcommittee of the Senate Committee on Homeland Security and Governmental
Affairs, and that it "is preparing to respond to the Subcommittee’s request and
intends to cooperate with the inquiry".
Mercury was embroiled in an accountancy scandal at the time it was acquired
by HP last November. Several top executives, including its CEO, resigned and the
company was forced to restate some of its financial results as a result of the
alleged practice of backdating stock options.
But despite an on-going SEC investigation into Mercury's past stock option
practices, HP insisted at the time that there were no unforeseen liabilities and
claimed it was happy with its due diligence ahead of the $4.5bn acquisition.
However, with the Senate subcommittee sniffing around, and a shareholder
class action suit seeking damages for Mercury’s alleged stock option abuses, the
purchase could create further legal problems for HP, which has only just
recovered from the recent boardroom spying scandal that engulfed the company.
Experts said that the latest development was unusual because the subcommittee
that had made the request typically focused on US national security; stock
option investigations such as this are usually handled by the Securities and
Exchange Commission (SEC) or Department of Justice.
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