Lawsuit against Madonna dismissed in Russia

ST. PETERSBURG, Russia (AP) — A Russian court on Thursday dismissed a lawsuit that sought millions of dollars in damages from Madonna for allegedly traumatizing minors by speaking up for gay rights during a concert in St. Petersburg.

The ruling came after a one-day hearing that bordered on the farcical. During it, plaintiffs claimed that Madonna's so-called "propaganda of perversion" would negatively affect Russia's birthrate and erode the nation's defense capability by depriving the country of future soldiers. At one point, the judge threatened to expel journalists from the courtroom if they laughed too much.

In the end, the Moskovsky district court in St. Petersburg threw out the Trade Union of Russian Citizens' lawsuit and the 333 million rubles ($10.7 million) it sought from the singer for allegedly exposing youths to "homosexual propaganda."

Madonna did not attend the trial, and her publicist Liz Rosenberg said Thursday the star wouldn't comment about it.

Anti-gay sentiment is strong in Russia, particularly in St. Petersburg, where local legislators passed a law in February that made it illegal to promote homosexuality to minors. Six months later, Madonna criticized the law on Facebook, then stood up for gay rights during a concert in St. Petersburg that drew fans as young as 12.

"Who will children grow up to be if they hear about the equal rights of the lesbian lobby and manly love with traditional sexual relations?" one of the plaintiffs, Darya Dedova, testified Thursday. "The death rate prevails over the birth rate in the West; young guys are becoming gender neutral."

The plaintiffs submitted evidence about gay culture drawn from Wikipedia pages, claiming that a real encyclopedia could not have articles about homosexuality.

"We aren't against homosexual people, but we are against the propaganda of perversion among minors," Dedova told the court. "We want to defend the values of a traditional family, which are currently in crisis in this country. Madonna violated our laws and she should be punished."

Madonna, who performed in Moscow and St. Petersburg in August as part of her world tour, also angered Russian officials by supporting jailed members of the Russian punk band Pussy Riot. The American said during her Moscow concert that she would "pray for them," then turned around so the audience could see the words "Pussy Riot" written on her back. The singer also donned a ski mask similar to those worn by Pussy Riot.

Despite international outrage, three of that band's members were sentenced to two years in jail on hooliganism charges for performing a "punk prayer" at Moscow's main cathedral, during which they pleaded with the Virgin Mary to deliver Russia from President Vladimir Putin. One of the Pussy Riot members was later released from jail on appeal, but the other two were sent to prison camps to serve their sentences.

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Seddon reported from Moscow.

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Judge to let Hostess liquidation proceed

Hostess Brands Inc. on Wednesday won permission from a U.S. bankruptcy judge to begin shutting down, and expressed optimism it will find new homes for many of its iconic brands, which include Twinkies, Drake's cakes and Wonder Bread.

U.S. Bankruptcy Judge Robert Drain in White Plains, New York authorized management, led by restructuring specialist Gregory Rayburn, to immediately begin efforts to wind down the 82-year-old company, a process expected to take one year.

"It appears clear to me that the debtors have taken the right course in seeking to implement the wind-down plan as promptly as possible," Drain said near the end of a four-hour hearing.

The judge authorized Hostess to begin the liquidation process one day after his last-ditch mediation effort between the Irving, Texas-based company and its striking bakers' union broke down.

Roughly 15,000 workers were expected to lose their jobs immediately, and most of the remaining 3,200 would be let go within four months.

"This is a tragedy, and we're well aware of it," Heather Lennox, a lawyer for Hostess, told the judge. "We are trying to be as sensitive as we can possibly be under the circumstances to the human cost of this."

Lennox said Hostess has received a "flood of inquiries" from potential buyers for several brands that could be sold at auction, and expects initial bidders within a few weeks.

Joshua Scherer, a partner at Perella Weinberg Partners, which is advising Hostess, said the company was in "active dialogue" over its Drake's brand with one "very interested" party that had toured a New Jersey plant on Tuesday.

He said that regional bakeries, national rivals, private equity firms and others have also expressed interest in various brands and that more than 50 nondisclosure agreements have been signed.

"These are iconic brands that people love," Scherer said.

While prospective buyers were not identified at the hearing, bankers have said rivals including Flowers Foods Inc. and Mexico's Grupo Bimbo SAB de CV were likely to be interested in some of the brands.

Representatives of neither company responded on Wednesday to requests for comment.

Scherer said Hostess could be worth $2.3 billion to $2.4 billion in a normal bankruptcy, an amount equal to its annual revenue. It also has about $900 million of secured debt and faces up to about $150 million of administrative claims.

Scherer expects a discount in this case because plants have already been closed and Hostess' value could fall further if the liquidation were dragged out.

"I've had buyers tell me, 'Josh, the longer it takes, the less value I'm going to be able to pay you,' " he said.

Hostess decided to liquidate on Nov. 16, saying it was losing about $1 million per day after the Bakery, Confectionery, Tobacco and Grain Millers Union, representing close to one-third of its workers, went on strike a week earlier.

The bakers union walked out after Drain authorized Hostess to impose pay and benefit cuts, which the International Brotherhood of Teamsters, Hostess' largest union, had accepted.

Hostess has about 33 plants, plus three it decided to close after the strike began, as well as 565 distribution centers and 570 bakery outlet stores.

Many of the 3,200 workers expected to stay on will help shut these properties and prepare them for sale. Hostess expects to need only about 200 employees by late March.

Rayburn, a former chief restructuring officer for the bankrupt phone company WorldCom Inc., said that letting 15,000 workers go now helps preserve their ability to obtain unemployment benefits.

"I need to maximize the value of the estate, but I need to do the best I can for my employees," he said.

Hostess filed for Chapter 11 protection on Jan. 11, its second bankruptcy filing in less than three years.

The case is In re: Hostess Brands Inc. et al, U.S. Bankruptcy Court, Southern District of New York, No. 12-22052.

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Brother: Rep. Jesse Jackson Jr. to announce resignation

Rep. Jesse Jackson Jr. will announce his resignation from Congress today in a letter to House Speaker John Boehner, Jackson's brother Jonathan Jackson said.

He spoke to the Chicago Tribune by telephone.

The congressman could not be reached for confirmation. Boehner's office also could not be immediately reached.

Jackson, 47, a South Side Democrat, has been treated for bipolar depression and has been on a medical leave from Congress since June. He has been under investigation by federal authorities for alleged misuse of campaign dollars and also has faced a congressional ethics probe.

Although he did not wage a campaign, Jackson won re-election on Nov. 6 to another two-year term in the House by defeating a Republican and independent challenger. Under Illinois law, Gov. Pat Quinn, a fellow Democrat, would call a special election to fill Jackson’s 2nd District congressional seat, which extends from Chicago’s South Side to Kankakee.

He is the son of the Rev. Jesse Jackson, the civil rights leader, and the husband of Chicago Ald. Sandi Jackson, 7th.

Rep. Jackson has been under investigation by the House Ethics Committee for alleged improprieties related to his bid to win appointment in 2008 to the Senate seat that had been held by President Barack Obama. A Jackson emissary is alleged to have offered to raise up to $6 million in campaign funds for disgraced former Gov. Rod Blagojevich in exchange for the governor appointing Jackson to the Senate seat.

Blagojevich is serving a prison term for corruption convictions including trying to sell or trade the Senate seat.

After the March primary election, the congressman’s aides belatedly announced his medical leave, which at first was blamed on “exhaustion.”

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In HP-Autonomy debacle, many advisers but little good advice

(Reuters) - When Hewlett Packard acquired Autonomy last year for $11.1 billion, some 15 different financial, legal and accounting firms were involved in the transaction -- and none raised a flag about what HP said Tuesday was a major accounting fraud.

HP stunned Wall Street with the allegations about its British software unit and took an $8.8 billion writedown, the latest in a string of reversals for the storied company.

HP Chief Executive Meg Whitman, who was a director at the company at the time of the deal, said the board had relied on accounting firm Deloitte for vetting Autonomy's financials and that KPMG was subsequently hired to audit Deloitte.

HP had many other advisers as well: boutique investment bank Perella Weinberg Partners to serve as its lead adviser, along with Barclays. Banking advisers on both sides of the deal were paid $68.8 million, according to data from Thomson Reuters/Freeman Consulting.

Barclays pocketed the biggest banker fee of the transaction at $18.1 million and Perella was paid $12 million. The company's legal advisers included Gibson, Dunn & Crutcher; Freshfields Bruckhaus Deringer; Drinker Biddle & Reath; and Skadden, Arps, Slate, Meagher & Flom, which advised the board.

On Autonomy's side of the table were Frank Quattrone's Qatalyst Partners, which specializes in tech deals and which picked up $11.6 million.

UBS, Goldman Sachs, Citigroup, JPMorgan Chase and Bank of America were also advising Autonomy and were paid $5.4 million each. Slaughter & May and Morgan Lewis served as the company's legal advisers.

While regulators in the United States and the United Kingdom, as well as the Federal Bureau of Investigation, are likely to spend many months if not years investigating what happened, legal experts said on Tuesday that it wasn't clear if any of the advisers would ultimately be held liable.

"The most logical deep pocket would be the acquired firm's auditors, who should have allegedly caught these defalcations," said James Cox, a professor at Duke University law school who specializes in corporate and securities law. Since both auditors missed the problems and it appeared to have taken HP a while to catch it after it took over Autonomy, the auditors may have a strong defense.

"You can have a perfectly sound audit and still have fraud exist," he said. A Deloitte UK spokesman said the company could not comment and would cooperate with any investigations.

The law firms and the bankers will likely argue that they were not hired to review the bookkeeping and had relied on the opinion of the auditors, securities law experts said.

Multiple sources with knowledge of the HP-Autonomy transaction added that the big-name banks on Autonomy's side were brought in days before the final agreement was struck. These sources said the banks were brought on as favors for their long relationships with the companies, in a little-scrutinized Wall Street practice of crediting -- and paying -- investment banks that actually have little do with the deal.

LAWSUITS, REPUTATIONS AT STAKE

Plaintiffs lawyers said they were taking calls from investors about HP on Tuesday. Darren Robbins, a San Diego-based plaintiff lawyer who represents shareholders, said the tech icon appears to have spent billions on a shoddy company without undertaking the proper due diligence, and thus misrepresented its finances to investors.

"I think they have serious troubles," he said.

But plaintiff lawyers may have difficulty bringing so-called derivative lawsuits against professional services firms, said Brian Quinn, an M&A professor at Boston College Law School. In those cases, plaintiff lawyers can sue third parties, such as auditors, on behalf of HP -- but they must convince a judge that HP's board is unfit to pursue those claims itself. In this situation, though, HP's board disclosed the alleged fraud itself, Quinn said.

Even if the bankers and lawyers escape any legal problems, they could suffer a reputational hit. The scrutiny could be particularly unwelcome for Perella Weinberg: the firm advised Japanese camera maker Olympus' acquisition of British Gyrus -- a transaction that prompted investigations in the United States, United Kingdom and Japan into fees and payments made by Olympus.

Olympus had hired Perella to execute the transaction, which included a fee paid to "advisers" of $687 million - way beyond the usual scale for a transaction valued at only $2 billion. Perella was not implicated in the matter.

Meanwhile, the most controversial banker involved in the HP-Autonomy deal, Frank Quattrone of Qatalyst, represented Autonomy and played a key role in getting HP to pay a high price.

A star investment banker in the 1990s, Quattrone had worked at Morgan Stanley, Deutsche Bank and Credit Suisse, and helped arrange some of the biggest tech initial public offerings of the era, including Amazon.com Inc and Cisco Systems Inc.

But his time at the top of Silicon Valley was curtailed by charges that he blocked an investigation into IPO kickbacks. After two trials failed to resolve his case, he ultimately reached a deal with prosecutors.

His return to the Silicon Valley M&A scene has impressed many in the tech world.

"His reputation is at an all-time high right now," said Dan Scheinman, the former head of mergers and acquisitions at Cisco who has worked with Quattrone on several deals.

Analysts almost uniformly deemed the $11.1 billion he got HP to pay for Autonomy as overly rich -- a compliment to him at the time, but possibly a hollow success if HP's allegations prove true.

(Reporting By Nadia Damouni and Nicola Leske in New York and Andrew Callus in London. Additional reporting by Dan Levine in San Francisco.; Editing by Peter Lauria, Jonathan Weber, Muralikumar Anantharaman, Janet McBride)

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Boxer 'Macho' Camacho critical in Puerto Rico

SAN JUAN, Puerto Rico (AP) — Hector "Macho" Camacho was clinging to life Wednesday after being shot in the face while in a car, with doctors and his family expected to decide whether to remove the former boxing champion from life support.

Doctors initially had said Camacho was in critical, but stable condition and expected to survive after he was shot Tuesday night in his hometown of Bayamon. But his condition worsened overnight and his heart stopped at one point, said Dr. Ernesto Torres, director of the Centro Medico trauma center in San Juan.

"He's battling minute to minute. This is the most important fight of his life," Torres told The Associated Press outside the hospital in the Puerto Rican capital.

Torres said doctors were trying to determine the boxer's level of brain activity.

The specialists will then consult with other doctors and Camacho's mother, who flew in Wednesday from New York, to discuss whether he should be removed from life support, said Ismael Leandry, a longtime friend and former manager who was also at the hospital.

"We just have to wait to see if 'Macho' gets better. It's a hard battle," Leandry told AP.

Torres said Camacho's mother, Maria, spent about 20 minutes with her son, one of the most dynamic boxing personalities of his era, and was expected to return for a second visit on Wednesday night.

"His mother came and she is devastated," he said. "She knows the prognosis is not at all favorable."

A godson, Widniel Adorno, said the family has discussed the possibility of organ donation but no final decision has been made.

The 50-year-old Camacho was outside a bar in a parked Ford Mustang with a friend when he was shot in the face. The friend, identified as 49-year-old Adrian Mojica Moreno, was killed. Police said two assailants fled in an SUV but no arrests have been made and no motive has been disclosed.

Camacho was rushed to Centro Medico, where doctors initially said the bullet passed through his jaw and lodged in his shoulder. Torres said the bullet damaged three of the four main arteries in his neck and fractured two vertebrae, which could leave him paralyzed if he were to survive.

Steve Tannenbaum, who has also represented Camacho in the past, had been told earlier by friends at the hospital that the boxer would make it.

"This guy is a cat with nine lives. He's been through so much," he said. "If anybody can pull through it will be him."

Friends and family members waited anxiously at the hospital, fondly recalling Camacho's high-energy personality and his powerful skills in the ring.

"He was like a little brother who was always getting into trouble," said former featherweight champion Juan Laporte, a fellow Puerto Rican who grew up and trained with Camacho in New York.

Camacho has been considered one of the more controversial figures in boxing, but also popular among fans and those who worked in the sport.

"The Macho Man was a promoter's dream," renowned promoter Don King told AP. "He excited boxing fans around the world with his inimitable style. He was a nice, amiable guy away from the ring."

King had promoted Camacho but was caught off guard by news of the attack on the former champion. "What a tragedy this is," he said. "I'm very sorry for Hector and his family. My prayers go out to him."

The fighter's last title bout came against then-welterweight champion Oscar De La Hoya in 1997, a loss by unanimous decision. He last fought in May 2010, losing to Saul Duran. Tannenbaum said they were looking at a possible bout in 2013.

"We were talking comeback even though he is 50," he said. "I felt he was capable of it."

Camacho was born in Bayamon, one of the cities that make up the San Juan metropolitan area

He left Puerto Rico as a child and grew up mostly in New York's Harlem neighborhood, one of the reasons he later earned the nickname "the Harlem Heckler."

He went on to win super lightweight, lightweight and junior welterweight world titles in the 1980s.

Camacho has fought other high-profile bouts in his career against Felix Trinidad, Julio Cesar Chavez and Sugar Ray Leonard. Camacho knocked out Leonard in 1997, ending what was that former champ's final comeback attempt.

Camacho has a career record of 79-6-3.

In recent years, he has divided his time between Puerto Rico and Florida, appearing regularly on Spanish-language television as well as on a reality show called "Es Macho Time!" on YouTube. In San Juan, he had been living in the beach community of Isla Verde, where he would obligingly pose for photos with tourists who recognized him on the street, said former pro boxer Victor "Luvi" Callejas, a neighbor and friend.

"We all know what Macho Camacho has done, but in the last couple of months he hasn't been in any trouble," Callejas said as he kept vigil outside the hospital. "He has been taking it easy. He's been upbeat."

Drug, alcohol and other problems have trailed Camacho since the prime of his boxing career. He was sentenced in 2007 to seven years in prison for the burglary of a computer store in Mississippi. While arresting him on the burglary charge in January 2005, police also found the drug ecstasy.

A judge eventually suspended all but one year of the sentence and gave Camacho probation. He wound up serving two weeks in jail, though, after violating that probation.

His wife also filed domestic abuse complaints against him twice before their divorce several years ago.

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Associated Press writers Ben Fox in San Juan, Puerto Rico and David Skretta in Kansas City contributed to this report.

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US abortions fall 5 pct, biggest drop in a decade

NEW YORK (AP) — U.S. abortions fell 5 percent during the recession and its aftermath in the biggest one-year decrease in at least a decade, perhaps because women are more careful to use birth control when times are tough, researchers say.

The decline, detailed on Wednesday by the Centers for Disease Control and Prevention, came in 2009, the most recent year for which statistics are available. Both the number of abortions and the abortion rate dropped by the same percentage.

Some experts theorize that some women believed they couldn't afford to get pregnant.

"They stick to straight and narrow ... and they are more careful about birth control," said Elizabeth Ananat, a Duke University assistant professor of public policy and economics who has researched abortions.

While many states have aggressively restricted access to abortion, most of those laws were adopted in the past two years and are not believed to have played a role in the decline.

Abortions have been dropping slightly over much of the past decade. But before this latest report, they seemed to have pretty much leveled off.

Nearly all states report abortion numbers to the federal government, but it's voluntary. A few states — including California, which has the largest population and largest number of abortion providers — don't send in data. While experts estimate there are more than 1 million abortions nationwide each year, the CDC counted about 785,000 in 2009 because of incomplete reporting.

To come up with reliable year-to-year comparisons, the CDC used the numbers from 43 states and two cities — those that have been sending in data consistently for at least 10 years. The researchers found that abortions per 1,000 women of child-bearing age fell from about 16 in 2008 to roughly 15 in 2009. That translates to nearly 38,000 fewer abortions in one year.

Mississippi had the lowest abortion rate, at 4 per 1,000 women of child-bearing age. The state also had only a couple of abortion providers and has the nation's highest teen birth rate. New York, second to California in number of abortion providers, had the highest abortion rate, roughly eight times Mississippi's.

Nationally since 2000, the number of reported abortions has dropped overall by about 6 percent and the abortion rate has fallen 7 percent.

By all accounts, contraception is playing a role in lowering the numbers.

Some experts cite a government study released earlier this year suggesting that about 60 percent of teenage girls who have sex use the most effective kinds of contraception, including the pill and patch. That's up from the mid-1990s, when fewer than half were using the best kinds.

Experts also pointed to the growing use of IUDs, or intrauterine devices, T-shaped plastic sperm-killers that a doctor inserts into the uterus. A study released earlier this year by the Guttmacher Institute, a nonprofit organization that does research on reproductive health, showed that IUD use among sexually active women on birth control rose from less than 3 percent in 2002 to more than 8 percent in 2009.

IUDs essentially prevent "user error," said Rachel Jones, a Guttmacher researcher.

Ananat said another factor may be the growing use of the morning-after pill, a form of emergency contraception that has been increasingly easier to get. It came onto the market in 1999 and in 2006 was approved for non-prescription sale to women 18 and older. In 2009 that was lowered to 17.

Underlying all this may be the economy, which was in recession from December 2007 until June 2009. Even well afterward, polls showed most Americans remained worried about anemic hiring, a depressed housing market and other problems.

You might think a bad economy would lead to more abortions by women who are struggling. However, John Santelli, a Columbia University professor of population and family health, said: "The economy seems to be having a fundamental effect on pregnancies, not abortions."

More findings from the CDC:

— The majority of abortions are performed by the eighth week of pregnancy, when the fetus is about the size of a lima bean.

— White women had the lowest abortion rate, at about 8.5 per 1,000 women of child-bearing age; the rate for black women was about four times that. The rate for Hispanic women was about 19 per 1,000.

— About 85 percent of those who got abortions were unmarried.

— The CDC identified 12 abortion-related deaths in 2009.

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Justin Bieber won't face charge for May encounter

LOS ANGELES (AP) — Prosecutors decided not to file any charges against Justin Bieber after investigators found no evidence that the pop star had kicked and punched a photographer after leaving a movie theater last month, a document obtained Wednesday states.

Prosecutors had been asked by police to consider filing a misdemeanor battery charge against Bieber, but Los Angeles County sheriff's investigators found no visible injuries, video or photographs to confirm the allegations by the photographer.

Bieber, 18, was leaving the theater in suburban Calabasas with girlfriend Selena Gomez on May 27 when he had the encounter in a parking lot.

A doctor found only superficial injuries, and deputies observed no injuries on the man after the incident, the document states.

Authorities interviewed several witnesses but none reported seeing Bieber kick the man, and they noted that the photographer kept taking photos as the two singers left the location, according to the charge evaluation worksheet prepared by the district attorney's office.

"All the photos and video taken during this incident by the many photographers were obtained and reviewed," the document states. "There are no photos of a physical altercation."

The case was rejected on Oct. 22 and first reported Wednesday by celebrity website TMZ.

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Anthony McCartney can be reached at http://twitter.com/mccartneyAP

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Judge rejects 9/11 suit against United

United Airline employees help passengers at the check-in counter in Terminal 1 at Chicago O'Hare International Airport. (Stacey Wescott, Chicago Tribune / November 15, 2012)

Reuters

9:48 a.m. CST, November 21, 2012

United Airlines bears no responsibility for suspected security lapses at a Maine airport that allowed hijackers onto the American Airlines plane that crashed into one of the World Trade Center towers on Sept. 11, 2001, a federal judge ruled.

U.S. District Judge Alvin Hellerstein on Wednesday granted a request by United and its parent United Continental Holdings Inc. to dismiss negligence claims brought by Larry Silverstein, the leaseholder of the World Trade Center property.

The decision concerned the destruction of 7 World Trade Center, the North Tower that collapsed hours after being pierced by debris stemming from the crash of AMR Corp.'s American Airlines Flight 11 into 1 World Trade Center.

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Elmo puppeteer resigns amid new sex allegation

Kevin Clash, who created the persona and voice of Elmo on 'Sesame Street,' has resigned amid a new accusation that he had sex with an under-aged youth. (Nov. 20) (Source: Associated Press)

Reuters

12:59 p.m. CST, November 20, 2012

NEW YORK—

Kevin Clash, the puppeteer behind the “Sesame Street” character Elmo, resigned on Tuesday following new allegations that he had sex with an underage boy, adding to an ongoing controversy involving one of America's most popular children's brands.

The announcement came just a week after another man recanted his claims that Clash, 52, had sex with him when he was 16 years old.

“Unfortunately, the controversy surrounding Kevin's personal life has become a distraction that none of us wants, and he has concluded that he can no longer be effective in his job and has resigned from Sesame Street,” New York-based Sesame Workshop, the company behind the show, said in a statement.

“This is a sad day for Sesame Street,” it added.

In a lawsuit filed on Tuesday, Cecil Singleton is seeking more than $5 million in damages from Clash. Singleton claims he met the then 32-year-old puppeteer in 1993 in a gay chat room when he was 15.

It added that on numerous occasions over a period of years Clash engaged in sexual activity with Singleton.

A representative for Clash was not immediately available for comment on Tuesday.

The unnamed 23-year-old man who first accused Clash recanted his claims last week, saying the relationship was consensual. Clash had denied the allegations and acknowledged a past relationship with his accuser. He added the pair were both consenting adults at the time.

“I am a gay man. I have never been ashamed of this or tried to hide it,” Clash said at the time, adding that he was taking a break from the TV show to deal with the situation.

Sesame Workshop said the allegations involving Clash came to its attention in June when the first accuser first contacted the company by email.

The Elmo character debuted on “Sesame Street” in 1979. While Clash was the third performer to animate the child-like shaggy red monster, Sesame Workshop credits him with turning Elmo into the international sensation he became.

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HP alleges Autonomy wrongdoing, takes $5 billion charge

(Reuters) - Hewlett-Packard Co on Tuesday took a massive $5 billion charge, claiming a raft of improprieties, misrepresentation and disclosure failures at software firm Autonomy, which it acquired last October for $11.1 billion.

HP said it discovered "serious accounting improprieties" and "a willful effort by Autonomy to mislead shareholders" after a whistleblower came forward.

The latest charge, which follows a nearly $11 billion charge last quarter for its EDS services division, is the latest blow to HP. The technology company has been roiled in the past few years by a revolving door of CEOs, overall management turnover and challenges in its core personal computer and printer businesses.

Former Autonomy Chief Executive Mike Lynch, who was pushed out in May, "flatly rejected" HP's allegations.

"The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false," a Lynch spokeswoman said in a brief statement to Reuters.

HP took $8.8 billion in charges in the fourth quarter, with $5 billion tied to the problems at Autonomy.

HP said it has referred the matter to the U.S. Securities and Exchange Commission's enforcement division and the UK's Serious Fraud Office for civil and criminal investigation. It said it will take legal action to recoup "what we can for our shareholders."

HP informed both the SEC and the Serious Fraud Office over the past week. Both agencies declined to comment.

HP's stock slid to a 10-year low, losing 11.2 percent to $11.81 in afternoon trading. Shares are down nearly 50 percent year to date.

INFLATED SALES, REVENUE

HP alleged that Autonomy's former management inflated revenue and gross margins. It said Autonomy executives mischaracterized revenue from low-end hardware sales as software sales and booked some licensing deals with partners as revenue, even though no customer bought the product.

HP said it began an internal investigation, including a forensic review by PricewaterhouseCoopers of Autonomy's historical financial results, under HP General Counsel John Schultz after the whistleblower came forward.

Schultz said since the accounting troubles occurred prior to the acquisition, it took a long time before the company was in a position to make the news public.

"Not surprisingly, Autonomy did not have sitting on a shelf somewhere a set of well-maintained books that would walk you through what was actually happening from a financial perspective inside the company," he said. "Indeed critical documents were missing from the obvious places, and it required that we look in every nook and cranny."

HP CEO Meg Whitman said her predecessor, Leo Apotheker and the former chief strategy officer, Shane Robison, were the key people behind the Autonomy acquisition.

Apotheker was ousted as CEO in September 2011 after just 11 months on the job and Robison left soon after.

"Most of the board was here and voted for this deal, and we feel terribly about that," said Whitman on a call with analysts. "The board relied on audited financials, audited by Deloitte. Not Brand X accounting firm, but Deloitte," she said, adding that KPMG was hired to audit Deloitte.

"Neither of them saw what we now see after someone came forward to point us in the right direction," Whitman said.

Other advisers who worked on the deal included Qatalyst Partners, the investment bank run by technology investment banker Frank Quattrone; UBS; Goldman Sachs; Citigroup; JPMorgan Chase and Bank of America for Autonomy. Perella Weinberg Partners and Barclays Capital advised for HP.

Law firms for Autonomy were Slaughter & May and Morgan Lewis. The firms for HP included Gibson, Dunn & Crutcher; Freshfields Bruckhaus Deringer; Drinker Biddle & Reath; and Skadden, Arps, Slate, Meagher & Flom, which advised the board.

Lynch said he was "shocked to see" HP's allegations, adding that its due diligence prior to the acquisition was "intensive." He said HP's senior management was "closely involved with running Autonomy for the past year."

In response, Whitman said on CNBC the company stands by its findings.

In a statement, Apotheker said he was "stunned and disappointed" by the revelations and offered to make himself available to HP and the authorities to get to the bottom of the matter.

Robert Enderle, a tech analyst at the Enderle Group, said he has never seen such a potential misrepresentation of financials.

"You have to rely on what the firm gives you during due diligence and I've never seen a misstatement at this level," Enderle said.

If the charges are true, it could result in a massive punitive damages award for HP, Enderle said.

Other analysts hoped it was the end of the bad news for the company.

"This kind of feels like the last of the bad news," Forrester analyst Frank Gillett said.

FOURTH-QUARTER LOSS

The Autonomy allegations and announcement of the charge coincided with the reporting of a fourth-quarter loss for HP.

Net revenue fell 6.7 percent to $29.96 billion for the fourth quarter ended October 31 from $32.12 billion a year earlier. Analysts, on average, expected $30.43 billion, according to Thomson Reuters I/B/E/S.

Revenue from all of its main business units declined, with the personal computer division recording the steepest drop at 14 percent.

HP reported a quarterly net loss of $6.85 billion, or $3.49 a share, versus a profit of $239 million, or 12 cents, a year earlier.

The sprawling company, which employs more than 300,000 people globally, is undergoing a restructuring aimed at focusing on enterprise services in the mold of International Business Machines Corp.

"To put it bluntly ... this story has been an unmitigated train wreck, and it seems every time management speaks to the Street, there is new negative incremental information forthcoming," said ISI Group analyst Brian Marshall.

(Reporting by Poornima Gupta in San Francisco, Nicola Leske in New York and Supantha Mukherjee in Bangalore; Additional reporting by Paul Sandle; Editing by Peter Lauria, Saumyadeb Chakrabarty and Jeffrey Benkoe)

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