HP Accuses Autonomy Of $5 Billion Fraud
HP is accusing Autonomy of fraud related to their acquisition of the software company in 2011 for $11.1 billion, stating that there were substantial instances of financial fraud in connection with the acquisition.
Hewlett-Packard also reported their October quarter profits slightly better than street estimates, but they cautioned that January quarter profits will be below estimates, reports Forbes.
In their specific accusations of fraud against Autonomy, HP cited $8.8 billion in non-cash charges “linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy.”
The statement adds that the improprieties “occurred prior to HP’s acquisition of Autonomy,” and is in essence writing down almost 90 percent of the transaction’s value. The company began an internal probe of the situation after a senior member of the software company’s leadership approached them after Autonomy founder and CEO Mike Lynch left.
CNBC notes, however, that Lynch was very surprised to hear about HP accusing Autonomy of fraud during their acquisition last year. Lynch stated:
“We’ve been pretty ambushed by this today. I think there’s been significant mismanagement of the company.”
Lynch added that the mismanagement came after HP took over the software company, adding that the due diligence on Autonomy “was what Hewlett-Packard described as meticulous.” He added, “And then they actually ran the company, including doing all of the books, for the last four quarters.”
HP CEO Meg Whitman also spoke about the fraud accusations, saying that the software company engaged in a “willful effort to mislead” HP shareholders and management during the acquisition.
HP made the fraud accusations about Autonomy during its financial results for its fiscal fourth quarter, which ended October 31. The announcement surprised investors and caused HP’s stock to plunge.