Former Autonomy Chief Challenges HP Fraud Allegations - InformationWeek
Government // Enterprise Architecture
04:08 PM
Connect Directly
[Dark Reading Crash Course] Finding & Fixing Application Security Vulnerabilitie
Sep 14, 2017
Hear from a top applications security expert as he discusses key practices for scanning and securi ...Read More>>

Former Autonomy Chief Challenges HP Fraud Allegations

Former Autonomy CEO Mike Lynch rejects HP allegations of impropriety. HP says questions will be answered in court.

10 CIOs: Career Decisions I'd Do Over
10 CIOs: Career Decisions I'd Do Over
(click image for larger view and for slideshow)
Rejecting allegations that Autonomy committed serious financial improprieties under his watch, former CEO Mike Lynch lashed out at Hewlett-Packard on Tuesday in an open letter to the company's board of directors.

Pleading innocence, Lynch described HP's massive $8.8 billion write down of Autonomy as excessive, and he called on HP to publicly detail how it determined that $5 billion of that amount was attributable to fraud.

HP quickly responded with its own statement repeating allegations that "accounting improprieties, disclosure failures and outright misrepresentations" occurred prior to HP's acquisition of Autonomy.

Rejecting Lynch's call for "immediate and specific explanations" of its allegations, HP said it would let legal and regulatory authorities handle the matter, concluding "we look forward to hearing Dr. Lynch and other former Autonomy employees answer questions under penalty of perjury."

In his letter, Lynch said he was shocked by HP's "non-specific but highly damaging allegations," and he accuses the company of "selective disclosure of non-material information via background discussions with the media."

[ Want more on HP's management struggles? Read HP's Identity Crisis Continues. ]

Zeroing in on the scale of HP's write down, Lynch asks HP's board to explain how such extensive misrepresentations "could possibly have gone undetected during the extensive acquisition due diligence process." HP acquired the U.K.-based company in October 2011 for $11.1 billion. Last week the company wrote down the value of Autonomy by $8.8 billion, attributing $5 billion of that write down to fraud.

Lynch noted that Autonomy's books were overseen by independent auditor Deloitte LLC prior to the acquisition. And just two months after the deal, in December 2011, he said that Paul Curtis, HP's Worldwide Director of Software Revenue Recognition, KPMG and Ernst & Young undertook detailed studies of Autonomy's software revenue recognition methods in order to comply with U.S. generally accepted accounting principles.

The implication is that HP is hanging an undue share of its financial performance failings on Autonomy's former management rather than owning up to its own mismanagement. Indeed, IT and financial analysts were critical of HP's acquisition from the start, saying the cost of the acquisition was far too steep. It remains to be seen if $5 billion in lost value can be attributed to fraud, but it appears HP is already acknowledging that it paid nearly $4 billion more than Autonomy was worth.

HP reiterated its contention that Autonomy's former management team managed to hoodwink auditors on both sides of the Atlantic. HP says it has referred the matter to the UK Serious Fraud Office, the U.S. Securities and Exchange Commission's Enforcement Division and the U.S. Department of Justice. "We will defer to them as to how they wish to engage with Dr. Lynch," HP stated.

Comment  | 
Print  | 
More Insights
Newest First  |  Oldest First  |  Threaded View
User Rank: Ninja
1/17/2013 | 7:43:34 PM
re: Former Autonomy Chief Challenges HP Fraud Allegations
The fact that auditors didbn't find anything proves nothing, ENRON had plenty of auditors. On the other side though HPs accusations dont' prove anyting either.
User Rank: Apprentice
11/29/2012 | 3:21:54 PM
re: Former Autonomy Chief Challenges HP Fraud Allegations
... further underscoring how HP's board is inept at managing the company. Fraud or no fraud, it's time for a sea change at HP. Or, someone can just turn the lights out on the way out the door.
How Enterprises Are Attacking the IT Security Enterprise
How Enterprises Are Attacking the IT Security Enterprise
To learn more about what organizations are doing to tackle attacks and threats we surveyed a group of 300 IT and infosec professionals to find out what their biggest IT security challenges are and what they're doing to defend against today's threats. Download the report to see what they're saying.
Register for InformationWeek Newsletters
White Papers
Current Issue
2017 State of IT Report
In today's technology-driven world, "innovation" has become a basic expectation. IT leaders are tasked with making technical magic, improving customer experience, and boosting the bottom line -- yet often without any increase to the IT budget. How are organizations striking the balance between new initiatives and cost control? Download our report to learn about the biggest challenges and how savvy IT executives are overcoming them.
Twitter Feed
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Flash Poll