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Autonomy under investigation by SFO, HP claims

THE SERIOUS FRAUD OFFICE has launched an investigation into accusations that suspect accounting practices were conducted at Autonomy prior to Hewlitt-Packard’s 2011 acquisition of the firm, HP said in a regulatory filing.

In a filing with the US Securities and Exchange Commission, HP said the SFO informed it on 6 February that it had “opened an investigation relating to Autonomy”. The SFO joins the US Department of Justice and the UK’s Financial Reporting Council in investigating allegations that “accounting improprieties” at Autonomy caused HP to overpay for the business.

HP acquired Autonomy in August 2011 for $11bn (£6.87bn), but was forced to write down £5.5bn in impairment costs 15 months later, which HP claims were the result of accounting misrepresentations discovered by PwC during a forensic review of Autonomy’s accounting practices.

Meg Whitman, HP chief executive, told analysts on the day of the write-down announcement that HP had relied heavily on the financial data audited by Deloitte, and brought in KPMG to essentially audit Deloitte’s work in a due diligence exercise.

Subsequently, lawsuits have been filed by investors, one alleging that Deloitte and KPMG missed numerous red flags – something both firms denied at the time – while the other suggested HP knew of misleading statements in the acquisition.

Mike Lynch, Autonomy’s former chief executive who left the company just seven months after the acquisition, has denied the business was wilfully misrepresented.

“HP has provided information to the UK Serious Fraud Office, the U.S. Department of Justice and the SEC related to the accounting improprieties, disclosure failures and misrepresentations at Autonomy that occurred prior to and in connection with HP’s acquisition of Autonomy,” HP said in its filing with the SEC.

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