Readers of the financial press will have noticed a stunning admission from the heads of Hewlitt-Packard this week, that they had been bamboozled by the managers of a company called Autonomy, which HP recently absorbed, causing them to lose the tidy sum of $8.8 billion. Oops! HP’s stock dropped like a stone, losing 13% in one day, heads rolled, etc.
Why this is not just another case of nefarious corporate hustling may be gleaned from this paragraph:
The Autonomy investigation is believed to have been started by a whistleblower in Autonomy's leadership who came forward after Lynch's departure. The whistleblower gave ‘numerous details’ of alleged accounting irregularities about which the company [HP] said it had no prior knowledge. HP called in PricewaterhouseCoopers to do a forensic review.
How curious that accounting fraud, i.e., not copping to your company’s true financial state, is named as the culprit in this gigantic rip-off. Hold that thought while we turn to another event of the week.
The State of Missouri has just settled a suit against one of the most notorious mortgage fraud operations involving so-called ‘robosigning’, in which minor officers of mortgage servicing firms around the country were discovered to be rubber-stamping foreclosure and other documents and notarizing them despite having no concrete knowledge of whether the facts and figures contained therein were true or recently pulled out of their aunt’s butler’s ass. This practice has been whitewashed since as ‘sloppy paperwork’ or ‘processing errors’ instead of what it was: fraud. Fraud of the most serious kind, i.e., fraud in the preparation of documents to be used in court.
So tons of these perps and their bosses were frog-marched off to jails from sea to shining sea as a result of this massive criminal scheme, right? Um, not so much. The mortgage fraud
Let’s take a moment to stop and think about what is being enabled here: banks and mortgage servicing companies can mess with the single most important asset of most American households and not fear prosecution if they make shit up, including documents that could cause homeowners to be falsely accused of missing payments and eventually losing their properties. If this sounds exaggerated, you’re not doing your homework—such cases have been reported over and over again in the ongoing scandal related to the destruction of the U.S. mortgage market, and IMHO the only reason there is no national movement to place heads on pikes in retaliation is that our president is named Obama rather than Bush or McCain.
Allowing corporate entities to falsify documents is equivalent to giving them permission to steal your checkbook and not worry about getting caught. Not prosecuting notary fraud undermines the entire system of contractual obligations and opens up the economy to rampant corruption a la Mexico or Azerbaijan.
Given this sorry and very recent history, HP’s dilemma at being bushwhacked by clever accounting crooks is not only not surprising but an omen of where corporate life could be headed. And if the big players suddenly discover that they can’t trust the guy in the next suit as far as they can throw him, they will have only themselves to blame.