Mobile Monitor Technologies, LLC (MMT), a privately owned Massachusetts-based technology company, filed suit on April 3, 2014 in California against PricewaterhouseCoopers and Hewlett-Packard for what it says were the two firms “combined market dominance, anti-competitive pricing, client-sharing arrangements, misappropriation of trade secrets, and fraudulent and deceptive advertising [that have] irrevocably blunted MMT’s prominence in the portable monitor market and resulted in a persistent and ongoing decline in its revenues.” MMT seeks damages in excess of $100 million.
MMT designs and manufactures portable laptop displays. Accounting firms are its largest customers. The firm was founded in 2009 by two entrepreneurs, Frederic A. Macdonald and Lawrence M. Pensack, and their accountant and business partner, Jeffrey J. Simmons, to create a laptop companion monitor for auditors in the field.
According to Mark O’Connor, CEO of consulting industry analyst firm, Monadnock Research, “The MMT complaint reads like a chapter out of a ‘How to Steal Trade Secrets for Dummies’ text. But most importantly, if MMT’s allegations against PwC and HP are accurate, the complaint shows how easy it would be for HP to offer a quid pro quo in exchange for PwC’s HP-friendly Autonomy forensic investigation report. The mere appearance that so many nested conflicts exist for a Big Four firm should be an embarrassment to PwC, the public accounting profession, and to US and UK regulators. But I’m afraid that it may simply be viewed by HP and PwC as a creative and highly profitable supplier relationship management arrangement.”
MMT says the company conceptualized and designed the world’s first full-sized portable computer monitor in November 2009. It introduced its portable monitor to the market and claims it coined the term “mobile monitor” to define its “first of a kind solution” in early 2011. PwC was first in line and began piloting the mobile monitors. As other accounting firms took notice and the press picked up on it, MMT was pressured to meet greater production demands. To prepare for a global rollout, MMT approached HP in mid-April 2011 and proposed a joint venture. At the same time MMT worked exclusively with PwC on a pilot of the monitors.
Unbeknownst to MMT, PwC had become, according to the complaint, HP’s “Agility Alliance” partner, a “synergistic relationship with minimal overlap or competing offerings across HP business units [that] can leverage each other’s trusted relationships and brand equity with CIOs and CFOs, respectively, to communicate the differentiated value of [their] joint solutions.”
MMT claims that HP and PwC colluded to steal MMT’s knowledge, strategies, and trade secrets, under the guise of partnership “negotiations,” which allowed HP to develop its own identically sized portable monitor. After PwC selected MMT’s mobile monitor to fill a $40 million order for distribution to its accounting professionals, the complaint alleges PwC contacted HP “to solicit a financially more advantageous below-cost pricing option and/or bundled discounts and/or other anti-competitive incentives—all before offering HP’s new product to the public.”
PwC reversed its decision to purchase the monitors from MMT, even though MMT says it had beaten other models, such as Toshiba and Lenovo which were already on the market, in a PwC procurement-led competition. PwC transferred its global order to HP, which had not yet offered its version of the product to the public. From the complaint:
[MMT CEO] Macdonald requested an immediate in-person meeting with PwC executives following the loss of the promised $40 million mobile monitor order. PwC’s Global Vice Chairman Mike Burwell, who acknowledged that PwC had mishandled the situation, said that he and Mr. Schott would meet with Mr. Macdonald at PwC’s New York City headquarters. Mr. Macdonald noted that an in-person discussion would permit PwC to reassess its decision to award its entire global portable monitor order to HP. Mr. Schott responded that the decision had already been made.
As a result, Mr. Macdonald then requested an immediate telephone conference with Messrs. Schott and Burwell. In the course of the conversation, and after many apologies, Mr. Burwell agreed to ‘make things right’ by purchasing MMT’s new accounting product, the Track10 keypad accessory. PwC assured MMT that it would place an immediate order for the device in unit quantities equal to MMT’s lost monitor business, without trials or pilot programs, if it demonstrated basic functionality (plugs in, keys function). MMT memorialized the verbal contract in December 11, 2012 letters sent via FedEx to both Mr. Burwell and Mr. Schott.
MMT expedited development for PwC’s Track10 keypad, sending PwC regular progress reports, CAD designs and video. On May 14, 2013, MMT sent the first working prototype to PwC. PwC never meaningfully responded to Mr. Macdonald’s inquiries about using the prototype and ultimately stopped replying to MMT’s emails and phone calls altogether.
Finally, on September 6, 2013, nearly 4 months after receiving the prototype, and a full ten months after rejecting MMT’s monitor and engaging with MMT on the development of this new product, Mr. Schott emailed Mr. Macdonald: “I have had our technical group evaluate the Track 10 and PwC has decided not to pursue its use.” Plaintiff had to then seek legal assistance to compel the return of the prototype.
[Bonus feature: Here is a video where PwC Chief Procurement Officer Schott describes how important his suppliers are to him and PwC. He is a former VP of Purchasing for Chrysler where he spent 26 years.]
The complaint says high level executives from PwC and HP produced an April 2013 commercial video in which HP describes its “first of a kind solutions” and HP claims credit for developing the world’s first “mobile monitor” for PwC. The video was originally posted to YouTube but, once it was mentioned to the defendants in conjunction with a potential lawsuit, PwC had it pulled. MMT CEO Fred Macdonald told me, “We’re using the video as evidence to prove that PwC’s last minute decision to buy HP’s monitors came from the top.”
The MMT complaint makes a throwaway reference to PwC’s role in HP’s mess with Autonomy, the acquisition that resulted in fraud accusations against Autonomy founder Mike Lynch and a $5 billion write down by HP:
The executives perceived yet another opportunity to exploit PwC’s symbiotic relationship with its Agility Alliance partner by asking HP, dominant in the broader computer monitor market, to enter the niche portable monitor market. In high-level discussions between HP and PwC, HP agreed to manufacture and deploy its own portable monitor and offer the brand new product to PwC at anticompetitive prices—through below-cost pricing and/or global bundling and/or by offering other Agility Alliance opportunities to PwC, equally dominant in its own accounting market.
With these promises in place, PwC overrode its internal dual monitor task force and awarded MMT’s $40 million contract to its Alliance partner. HP hastily implemented production of its monitor and strategically introduced it to the press and public after it was already in the hands of PwC employees. HP’s monitor was identical in size, configuration, resolution, and build quality to the existing Toshiba product, the same product PwC’s Ray Garcia and his dual monitor task force had already rejected. At or around this same time, HP engaged PwC to audit the Autonomy debacle. Six months later, HP further thanked its Agility Alliance partner for its new business with its prestigious Growth Award at HP’s largest industry event, “HP Discover 2013.”
HP filed revised accounts in February 2014 in the UK. Economia, the magazine of the Institute of Chartered Accountants of England and Wales (ICAEW), gives us the latest on the Autonomy “debacle” on March 20, 2014:
Read this article in its entirety at the re: The Auditors, a blog by Francine McKenna.
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