HP confirms Autonomy probe on alleged fraud

The US justice department has opened an investigation relating to Autonomy Corp after Hewlett-Packard accused the software company of misrepresenting its performance before being bought last year.

Department representatives told the company on Nov 21 of the probe, Hewlett-Packard said in its annual 10-K regulatory filing. The computer maker booked an $8.8bn (€6.75bn) writedown related to Autonomy last month after finding some revenue had been recorded prematurely or improperly.

Hewlett-Packard is co-operating with authorities while chief executive officer Meg Whitman works to turn the company around after years of botched deals, management tumult, and strategic missteps.

The California-based company also said it was providing information to Britain’s serious fraud office and the US Securities and Exchange Commission.

Former Autonomy CEO, Irish-born Mike Lynch, who left Hewlett-Packard in May and refutes the company’s allegations, struck a $10.3bn deal last year with Whitman’s predecessor, Leo Apotheker, to sell the company he co-founded.

HP’s filing did not include any additional details behind Hewlett-Packard’s claims of accounting errors, which made up $5bn of the writedown.

Michael Thacker, a spokesman for Hewlett-Packard, declined to comment yesterday beyond details in the filing.

“It is extremely disappointing that HP has again failed to provide a detailed calculation of its $5bn writedown of Autonomy, or publish any explanation of the serious allegations it has made against the former management team, in its annual report filing,” Lynch wrote in a statement.

“We will co-operate with any investigation and look forward to the opportunity to explain our position. We continue to reject these allegations in the strongest possible terms.”

The FBI is looking into Hewlett-Packard’s allegations of accounting improprieties at Autonomy, a person familiar with the matter said on Nov 21.

The company brought its claims about Autonomy to the SEC, which asked the FBI for assistance, said the person, who asked not to be identified because the matter was not public.

The FBI could neither confirm nor deny any investigation, said Julie Sohn, a spokeswoman for the agency in San Francisco.

In the filing, Hewlett-Packard said it was also facing several shareholder lawsuits related to the purchase of Autonomy.

Apotheker, who was ousted as CEO in Sept 2011, viewed Autonomy as Hewlett-Packard’s ticket into the high-margin software market, which constituted less than 3% of Hewlett-Packard’s sales at the time. Autonomy’s software is used to organise the reams of data flooding corporate computer networks.

Whitman, who was on the board at the time and approved the acquisition, has tried to distance herself and other directors from the decision, telling analysts on a Nov 20 conference call that the blame lies with Apotheker and former mergers and acquisitions head Shane Robison, who was also the company’s chief technology officer and departed last year.