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US regulators investigating alleged accounting irregularities at Autonomy, according to HP document

Out-Law News | 04 Jan 2013 | 11:29 am | 1 min. read

The US Department of Justice (DoJ) has launched an investigation into allegations of accountancy irregularities relating to Autonomy, the UK software business owned by Hewlett-Packard (HP).

Details of the probe were made public in a document submitted by HP to US regulator the Securities and Exchange Commission (SEC) late last month. It follows claims made by HP in a report in November that it had paid more money than it should have when it bought Autonomy in 2011 as a result of "serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy". Dr Mike Lynch, Autonomy's former chief executive, has fervently denied the allegations.

HP said that it has passed information to the Serious Fraud Office (SFO) in the UK, the DoJ and the SEC regarding the claims.

"As a result of the findings of an ongoing investigation, HP has provided information to the UK Serious Fraud Office, the US 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 to the SEC. "On November 21, 2012, representatives of the US Department of Justice advised HP that they had opened an investigation relating to Autonomy. HP is cooperating with the three investigating agencies."

In November last year HP said that its internal investigations had "uncovered extensive evidence of a wilful effort on behalf of certain former Autonomy employees to inflate the underlying financial metrics of the company in order to mislead investors and potential buyers," according to a report by the Wall Street Journal. At the time it said it would leave the SFO, DoJ and SEC to decide how to "engage" with Dr Lynch and that it would "take legal action against the parties involved at the appropriate time".

Dr Lynch had previously issued an open letter calling on HP to make "immediate and specific explanations for the allegations" it has made, which he described as both "shocking" and "highly damaging". In the letter, published by Reuters news agency, he said that Autonomy's finances had been "handled in accordance with applicable regulations and accounting practices" and that accountancy firm Deloitte, which had audited the accounts, had "confirmed the application of all appropriate procedures".

HP shareholder Philip Ricciardi is suing Deloitte and KPMG, among others, accusing the auditors of playing a part in the alleged misrepresentation of Autonomy's share value.

In December US financial watchdog the Public Company Accounting Oversight Board said that inspections it had made in 2010 of eight firms, including Deloitte & Touche, Ernst & Young, KPMG, Grant Thornton and PricewaterhouseCoopers (PwC), had revealed "deficiencies" in the way some accounts had been audited the previous year.