More Big 4 stories: HPE, Juniper, Autonomy, Kraft Heinz, Berkshire, Docusign
It's a summer full of repeats, wrangling, regrets, sins, restatements, and reversals.
“It was one of those midsummer Sundays when everyone sits around saying, “I drank too much last night.”
― John Cheever, The Stories of John Cheever
Some follow-up to my free for all newsletter from earlier this week is also free for all today.
Analysis on the resolution of the HPE claims against Autonomy's former CEO Michael Lynch and its former CFO Sushovan Hussain is behind the paywall.
In addition, after the paywall, I provide analysis on the Kraft Heinz proposed break-up, its auditor PwC, and the impact on and legacy of Berkshire Hathaway’s equity investment in the company.
I will also tell you about my latest effort to unseal documents in the Docusign case, another PwC audit client.
But first, a bit more on Erica Williams and her departure from the PCAOB.
Erica Williams “Exit” Interview
Capital Account did a great "exit" interview with PCAOB Chair Erica Williams. It's behind a paywall but I wanted to highlight a few of her comments.
On the need for an independent overseer focused on auditing:
“It is critically important. People may have forgotten what happened, but I haven’t, with respect to Enron and WorldCom…Those people who lost their life savings, and the workers who lost their jobs and people who lost their investments – they haven’t forgotten what happened in Enron and WorldCom. Senator [Paul] Sarbanes had a quote that I’ll paraphrase: When things are going well, people tend to forget what happened or how serious it [was]…One of the reasons that I think we haven’t seen another Enron or WorldCom, is because of the work of our staff who wake up every day trying to figure out how they can best protect investors.”
On concerns that the PCAOB and SEC have overlapping regulatory responsibilities:
“The PCAOB and the SEC best protect investors when we each bring our unique resources and talents to the table. There is no question that our staff has the expertise in the auditing standards that the SEC doesn’t have…We inspect around the world. They don’t have the inspectors that we have…I think they do amazing work. It’s just different from the work that we do here.”
On enforcement fines:
“We wanted to make sure that our sanctions weren’t just a cost of doing business…You can’t really have the same penalty you had 20 years ago and have it have a deterrent effect…Auditors’ whole job is to make sure that people are following the rules, and they should be following the rules too.”
You can read the whole thing here.
HPE and Juniper, an antitrust political scandal
This is one of those same auditors deals, in this case EY.
I wrote about the initial DOJ lawsuit to block the merger.
DOJ recently approved the merger.
However, like many merger deals lately being approved and federal prosecutions lately being dropped, there are strong rumors that corruption and bribery is greasing the wheels.
Breakdown at the DOJ.
The Trump Justice Department is embroiled in a corporate coup, exposing major rifts within the GOP coalition and a rampant culture of pay-to-play corruption. The graft, which has seen top prosecutors at the department fired, threatens to undo several ongoing Biden-era antitrust lawsuits against corporations like Apple, Visa, and Ticketmaster.
Rotten all the way down.
The Justice Department’s antitrust division recently walked back its own lawsuit blocking a $14 billion tech megamerger spearheaded by tech giant Hewlett Packard Enterprise (HPE) and instead approved the deal with a weak divestiture consent decree imposing limited obligations on the combined firm. HPE and its acquisition target, technology company Juniper Networks, are head-to-head competitors for the wi-fi system market that most businesses rely on, and the merger will increase consumer costs, according to the DOJ lawsuit.
What changed? In the months following the initial January lawsuit, HPE ran an increasingly common off-the-books lobbying campaign by bankrolling a team of shadowy Trump-connected consultants and influence peddlers.
That included paying a million dollars each to Arthur Schwartz, a confidant of Donald Trump Jr. and Vice President JD Vance, and MAGA antitrust whisperer Mike Davis, who celebrated the initial lawsuit before getting hired to argue the opposite.
Those consultants found a sympathetic ear with Attorney General Pam Bondi’s chief of staff, Chad Mizelle, who is tied to judicial puppet master Leonard Leo’s conservative legal network. In an unusual move, Mizelle overruled the antitrust division and let the merger proceed. Then this week, he fired two of the antitrust division’s top deputies who had dissented internally.
Follow the money.
Thanks to a 1974 anti-corruption law passed in the wake of the Nixon Watergate scandal — which also involved a cash-for-antitrust-waiver arrangement for a tech/telecom merger — companies are required to submit disclosures as part of merger consent decrees to ensure regulators aren’t cutting backroom deals. Such disclosures submitted last week by HPE, first reported by Capital Forum, revealed the company’s shadow lobbying effort. Because the dealings have come to light, the consent decree could be rejected by a district court judge as a violation of the 1974 law.
In a last-minute effort to save face, top Trump officials told Axios that intelligence authorities intervened to rubber-stamp the deal because of national security reasons, a claim that never appeared in any of the DOJ and HP’s legal briefs.
Here's a podcast on the subject also from Lever News.
Matt Stoller has more in his newsletter Big about what he calls an attempted coup at the Antitrust Division related to the deal approval.
And The Revolving Door Newsletter also has a take:
MAGA Coup At The Antitrust Division.
Trump’s pick to lead the Antitrust Division, Gail Slater, had some anti-monopolists hopeful that the Trump administration would take at least some populist antitrust action at the DOJ. To that end, back in January, the Antitrust Division filed to block Hewlett Packard Enterprise’s (HPE) $14 billion acquisition of Juniper Networks. The two companies are rivals, as both “make wifi systems for big campuses, like universities or corporations, and there are just three firms in the market.”
But instead of following through on the challenge, the Antitrust Division later reversed course and settled the Hewlett Packard-Juniper case in late June. New reporting revealed that Slater wasn’t on board with the settlement, and she was overruled by Pam Bondi’s chief of staff, Chad Mizelle, who negotiated with HPE’s Trump-friendly consultants. In the latest development, Slater’s two deputies were apparently fired on Monday, further undermining Slater’s ability to lead the Division.
As David Dayen described, “The ouster showed that the pay-to-play gang is defeating the right-populists in a battle for control inside the government.”
After the paywall I provide analysis on the Kraft Heinz proposed break-up, its auditor PwC, and the impact on and legacy of Berkshire Hathaway’s equity investment in the company.
I also tell you about my latest effort to unseal documents in the Docusign case, another PwC audit client.