Autonomy Landscape

FBI Investigating HP Autonomy Claims, Deloitte Defends Audit

FBI is investigating HP claims that former Autonomy management engaged in “serious accounting improprieties”

On by Steve McCaskill 0

The FBI is investigating allegations of “serious accounting improprieties” against former members of Autonomy’s management team prior to the British software company’s takeover by HP last year.

According to Bloomberg, the agency has responded to a request from the US Securities and Exchange Commission (SEC). Its source added that whenever a company reports a matter that could be criminal in nature, it will be examined, although there is no indication whether any action could result from the FBI’s interest.

Earlier this week, HP announced an $8.8 billion (£5.3bn) writedown as a result of the alleged improprieties and passed on the findings of an internal investigation to US and UK authorities. It says that these accounting practices inflated the value of Autonomy, which it acquired for $10.3bn (£6.7bn) in 2011.

HP Autonomy allegations

Specifically, HP alleges that Autonomy boosted its apparent software performance by mis-classifying revenues from some of its sales. It said that with low end sales, Autonomy would bundle in hardware, which it sold at a loss, but classify the revenue as software turnover for Autonomy’s IDOL product. Similarly, it alleged that Autonomy claimed some of its licensing transactions with value added resellers were from end users.

Former Autonomy CEO Mike Lynch has strongly denied the claim and has suggested that they were an attempt by HP to deflect attention from its disastrous results. Lynch has pointed out that HP’s due diligence was intensive and overseen on behalf of HP by KPMG, Barclays and Perella Weinberg, while HP’s senior management has been closely involved with Autonomy for the last year.

Deloitte, the accountancy firm that led the audit of Autonomy’s books during the takeover, has defended its work and said it would cooperate with any alleged irregularities. It told The Times it “categorically denied that it had any knowledge of any accounting improprieties or misrepresentations in Autonomy’s financial statements.” After the audit, KPMG looked over Deloitte’s work before clearing the takeover.

The sum paid by HP was the largest ever paid for a UK technology company, but analysts at the time said it was overpriced. Around 87.3 percent of Autonomy shareholders accepted HP’s offer of £25.50 per share, over 79 percent more than the market price for those shares.

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Steve McCaskill
Author: Steve McCaskill
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