21 November 2012

HP accuses Autonomy of massive accounting fraud

Californian technology group Hewlett-Packard has said it will take an $8.8 billion write-down following its acquisition of British e-discovery specialists Autonomy, amid allegations that the software maker's executives committed accounting fraud.

By James Barnes

$8.8 billion write-down

HP bought the Cambridge-based company last year for a whopping $10.3bn. But in statement yesterday – reported by Law Technology News – HP said: ‘The majority of this impairment charge, more than $5bn, is linked to serious accounting improprieties, misrepresentation and disclosure failures discovered by an internal investigation by HP and forensic review into Autonomy's accounting practices.’

Internal investigation

According to the report, HP launched an internal investigation following allegations made by a senior member of Autonomy’s leadership team – after the departure of Autonomy founder Mike Lynch.
In its statement, HP says the allegations included ‘a series of questionable accounting and business practices at Autonomy prior to the acquisition by HP’. The individual also detailed information of which HP ‘had no knowledge or visibility’, dispute due diligence provided by big four accountancy firms Deloitte and KPMG.
Michael Shannon, chief information officer at Philadelphia law firm Dechert – which stores 50 million documents in Automony's iManage software – commented: ‘When I initially heard that HP was buying Autonomy, I was actually pretty shocked, not understanding in what direction Autonomy was going to go, and more importantly in what direction iManage was going to go… With this news, I'm doubly concerned about what's going to happen now.’

Gaggle of law firms

Neil Araujo, chief executive of Automomy’s e-discovery division, and Dan Carmel, head of enterprise content management, are yet to comment.
HP is being advised by Philadelphia law firm Drinker Biddle & Reath, London magic circle firm Freshfields Bruckhaus Deringer, Los Angeles-headquartered Gibson, Dunn & Crutcher and New York’s Skadden, according to a reports from the Reuters news agency.
Autonomy is advised by Philadelphia’s Morgan Lewis and London magic circle firm Slaughter and May.

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