On Thursday, lawyers for H-P director Walter Hewlett again summoned H-P Chief Executive Carly Fiorina to the stand after she had spent seven hours in the witness chair earlier in the week, to explain why she told Deutsche Bank that the Compaq deal was “of great importance to our ongoing relationship.”
Fiorina made the comment in a meeting with Deutsche Bank investment managers, also attended by H-P chief financial officer Bob Wayman, just before the March 19 shareholder vote, which Fiorina claimed the company won.
“We very much appreciate your willingness to listen to us this morning,” Fiorina told the Deutsche money managers, according to the transcript read by Hewlett lawyer Stephen Neal. “This is obviously of great importance to us as a company. It is of great importance to our ongoing relationship. We very much would like to have your support here. We think this is a crucially important decision for this company.”
Charging that H-P executives put improper pressure on Deutsche to vote its shares for the deal and that they withheld an accurate picture of the acquisition’s financial impact, Hewlett wants a Delaware judge to throw out the shareholder vote.
Both H-P and Deutsche deny any wrongdoing even though Deutsche Bank was performing a variety of investment banking services for H-P.
Fiorina: A Common Way to Speak
In her testimony Thursday, Fiorina defended the “ongoing relationship” remark, saying it is a common way to speak to an investment bank, particularly one such as Deutsche Bank, which buys computer equipment from H-P in addition to providing financial services.
H-P lawyer Boris Feldman, who complained that Neal was standing too close to Fiorina as he showed her the transcript, denounced Neal for implying that Fiorina threatened Deutsche Bank.
“So this is what the bribery case comes down to now,” he said sarcastically.
However, Neal did have more ammunition – communications
between Deutsche Bank officials.
Internal Deutsche Bank Calls
In an internal call recorded March 19, Dean Barr, chief investment officer for Deutsche Bank Asset Management in New York, said to the bank’s proxy team that controlled the vote on the shares: “You may or may not be aware we have an enormous banking relationship with Hewlett-Packard. … Obviously if you don’t want to change your vote, that’s your call. I would suggest to you, and I’m not trying to put undue pressure, but make sure that you have a very strong documented rationale for why you voted the way you did as it relates to this merger. This is extremely sensitive.”
According to the official court transcript, a German representative replied to Barr: “I don’t want to be smarter than you people in New York, so if the majority of you come to the conclusion that it’s better for our customers to vote in favor, I tried to change our vote here, but I have to see what I can overcome. All the technical problems. I have to react very quickly.”
45-Million Share Lead
A preliminary tally released last week found that 51.4% of H-P shares were voted for acquiring Compaq, with 48.6% against.
That amounts to a lead of 45 million shares – which means that Chancery Court Judge William Chandler would have to do more than erase Deutsche Bank’s 17 million votes to overturn the deal.
To that end, Hewlett’s lawyers have also been trying to prove that the proxy campaign also was corrupted by H-P’s refusal to release updated internal projections showing the merged companies falling far short of their publicly released financial targets.
Testimony was expected to end Thursday evening.