HP Confirms Subsidiary Autonomy Being Probed By Justice Department
redOrbit Staff & Wire Reports – Your Universe Online
A British business software firm purchased by Hewlett-Packard last year is being investigated by the U.S. Department of Justice over accounting improprieties, the Palo Alto, California-based company confirmed in a Securities and Exchange Commission (SEC) filing Thursday.
According to AP Business Writer Michelle Chapman, the filing reveals HP had been advised back on November 21 that federal officials would be probing Autonomy, which was purchased by HP for $10 billion in 2011.
HP claims they had first become aware of the allegations earlier in the month when a senior Autonomy executive came forward with the charges. They also said they were cooperating fully with the investigation and the company had also provided information related to “accounting improprieties, disclosure failures and misrepresentations” under Autonomy’s previous management to both the SEC and the UK Serious Fraud Offices (SFO), Chapman added.
The company took an $8.8 billion write-down on Autonomy’s value and claimed approximately $5 billion of that was a result of accounting irregularities. However, Mike Lynch, founder and former CEO of the Cambridge-based IT firm, has denied the accusations and said in a statement HP has yet to provide any specifics about the alleged accounting irregularities or a detailed break-down of the $5 billion figure cited in the write-down.
In that statement, “Lynch said that he and other former executive directors of Autonomy had had ‘no contact from any regulatory authority’ on either side of the Atlantic. Reiterating previous denials: ‘Simply put, these allegations are false,’” said Dan Sabbagh of the Guardian. “Lynch said that he and colleagues intended ‘to co-operate with any investigation and look forward to the opportunity to explain our position.’
“The Cambridge-educated software entrepreneur also said… that HP’s filing was ‘now less clear’ on how much of the charge was ‘being attributed to the alleged accounting issues, and how much to other changes in business performance and earnings projections,’” Sabbagh added. “Sources close to Lynch say that the absence of any extra information in the HP document meant that the investigation into Autonomy appeared to be moving backwards.”
Initially following the take-over, Lynch continued to run Autonomy as a part of HP. However, their revenue growth and profit margin began to rapidly decline, leading HP CEO Meg Whitman to force him out on May 23 of this year, Chapman said. It was after his departure that a senior executive first came forward with the information about the alleged accounting issues, leading the company to launch an internal investigation, she added.