Autonomy Landscape

Shareholders File HP Autonomy Lawsuit, As Accountant Accused Of Ditching Shares

Class action lawsuit accuses HP of misleading investors

On by Steve McCaskill 0

HP is being sued by investors who claim that the company withheld information about the acquisition of Autonomy and “deceived the investing public,” following the computing giant’s announcement of an $8.8 billion (£5.3bn) writedown as a result of alleged “serious accounting improprieties at the British software company.

The class action lawsuit was filed in San Francisco and alleges that HP hid the fact that it gained control of Autonomy based on financial statements that could not be relied upon and that it did not reveal to investors that it tried to back out of the deal before it was concluded.

Shareholders have also accused HP’s chief accounting officer James Murrin of offloading $1.1 million (£686,000) worth of shares in the company in February, months before a whistleblower alerted HP to the alleged accounting malpractices, but after clashes between Autonomy and HP.  It is claimed that Murrin sold 42,500 shares, a sale that was facilitated by HP’s failure to disclose information that allowed board members to sell their stake at inflated prices.

HP Autonomy lawsuit

Autonomy was bought by HP last year in a $10.3 billion (£6.7bn) deal in 2011, the largest sum ever paid for a British technology company. Analysts at the time said that it was overpriced and Autonomy CEO Mike Lynch left HP in May amid reports of the Autonomy unit’s poor performance.

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 claims 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.

HP has passed on the results of an internal investigation to authorities on both sides of the Atlantic, with the FBI confirming that it was looking into the allegations last week.

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Steve McCaskill
Author: Steve McCaskill
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