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Deloitte and KPMG face litigation over HP/Autonomy deal

Jennifer Scott

Two of the big four accountancy firms have been named in a new lawsuit claiming damages for HP shareholders following the write-down of Autonomy.

HP bought Autonomy in 2011 for $11.7bn, but last week claimed former managers at the UK software firm had used “accounting improprieties, misrepresentations and disclosure failures to inflate the underlying financial metrics of the company” to boost its price before the acquisition went through.

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As a result, it wrote down the price of the asset by $8.8bn and referred the accused managers to the US Securities and Exchange Commission (SEC) and the UK Serious Fraud Office.

Mike Lynch (pictured), founder and former CEO of Autonomy, has denied all of these claims and in an open letter to HP said he was "shocked and appalled" by the allegations.

However, a stark response from HP said it would not discuss the case with Lynch further until the two parties were in court, where he would have to "answer questions under penalty of perjury".

Autonomy was regularly audited by Deloitte, and HP boss Meg Whitman said her firm used KPMG to check due diligence on these reports.

Philip Ricciardi, who has invested in HP since 2007, has filed a court case at the District court for the Northern District of California in San Jose against all three companies, as well as HP CFO Catherine Lesjak and former HP CEO Leo Apotheker.

The filing accuses the defendants of failing to conduct due diligence, and as a result costing HP shareholders billions when it "grossly" overpaid for Autonomy.

This is not the first court case raised by HP investors.

A class action against HP was filed in the same court earlier this week by investors wanting to seek damages after claiming HP was trading on an inflated stock price between the write-down of services firm EDS this summer and the write-down of Autonomy.

More cases are expected from investors, alongside the legal action HP is taking out against the former management of Autonomy.


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