IRS Says Former HP Chairman Ray Lane Owes $100 Million
Bloomberg News confirmed a rumor about Lane that has been making the rounds for several months, according to papers filed with the U.S. Tax Court in May.
Late last year, the IRS found that Lane had improperly claimed losses of more than $250 million to offset income. According to Bloomberg, who interviewed Lane (I reached out to him via email, and haven’t heard back), he said that in 2000 he was advised to move about $25 million into a fund that backed technology startups, the point being to use the losses from the fund to offset his taxable income. (Update: I’ve since heard from Lane. See additions to the story below.)
The IRS is accusing Lane of using an instrument known as Partnership Option Portfolio Securities to report what it says was an improper $250 million “non-economic loss” for the tax year 2000. POPS are generally not used anymore, in no small part because they’ve been rendered ineffective by government scrutiny.
It has been a tough few months for Lane. Also in May, he left the board of electric-car company Fisker after the decline of its business. He also scaled back his role as a partner at the venture capital firm Kleiner Perkins Caufield & Byers.
Lane stepped down from his post as HP’s executive chairman on April 4, but retained a seat on the company’s board. He survived a shareholder vote seeking his ouster from the board at HP’s annual shareholder meeting on March 20, having secured slightly less than 59 percent of votes cast.
Lane took a lot of flak from shareholders for HP’s 2011 acquisition of Autonomy. HP paid $10 billion and change for the British software firm, and subsequently wrote down its value by about $5 billion as part of a larger $8.8 billion charge in the fourth quarter of 2012.
He joined HP’s board in late 2010 as non-executive chairman on the same day that LĂ©o Apotheker was appointed CEO, weeks after the resignation of former CEO Mark Hurd.
Apotheker lasted 11 months in the CEO job. He was fired in September of 2011 and replaced by current CEO Meg Whitman, who was then an HP director. On the same day, Lane was named executive chairman and was widely seen as something of a backstop to Whitman, who was initially viewed as lacking experience in running a hardware-focused company like HP. In fact, on the day Whitman was appointed CEO, Lane did more than his share of talking on a conference call and in subsequent interviews.
Lane is a former president of Oracle, and left that company as the result of one of Silicon Valley’s more infamous management feuds with Oracle’s founding CEO Larry Ellison. For his part, Ellison has never missed an opportunity to lob darts in Lane’s direction.
An HP spokesman declined to comment on the grounds that Lane’s tax dispute is a personal matter.
Update: I got an email from Lane. He says “This is a 13 year old tax item, that has never been contested by me, only the Vandium partnership. When the IRS decided it was a tax shelter and I would be liable, I immediately settled.” He went on to explain that by “settled,” he means he and the IRS have agreed to some terms, but it is not yet paid. The Vandium Partnership continues to dispute IRS’ case, but Lane himself as partner — he doesn’t know who the others are — has not.