Autonomy CEO Mike Lynch co-operates in HP fraud probe

Former CEO and founder of Autonomy Mike Lynch says he will co-operate with a US investigation into fraud alleged by parent firm HP

Mike Lynch, the former CEO and founder of business intelligence software firm Autonomy, says he will co-operate with an investigation by the US Department of Justice into alleged fraud at the company.

HP acquired Autonomy in 2011 for $11.7bn but, in November 2012, 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.

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

In late December 2012, HP confirmed the US Department of Justice had opened an investigation into the allegations surrounding accounting fraud at Autonomy.

Mike Lynch – who left HP in May 2012 – said he had yet to hear from US authorities, but would co-operate with any investigation, according to reports.

Lynch has reiterated criticisms of HP for accusing the former Autonomy management team in the media without providing any details behind why it wrote down the value of the acquisition.

Lynch insists HP's allegations are false. “We do not understand why HP is raising these issues now, given that Autonomy reported into the HP Finance team from the day the acquisition completed in October 2011, there was an extensive due diligence process and Autonomy was audited as a public company for many years," he said.

“It is now less clear how much of the $5bn write-down is in fact being attributed to the alleged accounting issues, and how much to other changes in business performance and earnings projections.”

Due diligence

After HP’s public announcement of the allegation in November, Lynch wrote an open letter to the board of directors at HP. He said he was shocked that they had not contacted him prior to publishing. He also rejected all allegations of impropriety.

According to Lynch, HP’s CFO Cathie Lesjak and her team – plus a number of outside advisors – had access to all Autonomy accounts and documents from October 2011 onwards and raised no issues.

He also points out that in November 2011, HP and KPMG reviewed Autonomy’s closing balance sheet in detail, with Ernst & Young reviewing Deloitte’s audit work papers. In October 2011, HP studied in detail Autonomy’s tax structure and transfer pricing as well as its revenue recognition practices. An independent, third-party valuation of Autonomy’s assets was carried out in January 2012.

In addition, Lynch said quarterly business reviews were held with Autonomy management, HP CEO Meg Whitman and Cathie Lesjak to discuss Autonomy’s financial performance.

With reference to differences between IFRS and GAAP accounting standards – which appear to have a role in some of the allegations HP has made – Lynch said Autonomy’s accounting policies were made clear in Autonomy’s 2010 annual report.

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Surely if Lynch waits long enough, then the DOJ/SFO will eventually come knocking? Hopefully he'll get the chance to disprove these allegations in a court of law - if he's found guilty, he should be locked up with all the other crooks.

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If Lynch (and he's not a real Dr btw) is that "disappointed" at HP's remarks/allegations, surely he should take legal action if he has nothing to hide. Seems like he's sweating to me. Would love to see Lynch, the COO (Kanter), CMO (Eagan), CTO (Menel), and last but definitely not least the CFO (Hussain) all give evidence under oath. What happened to Lynch's Auminence software which he announced for the healthcare market in mid 2011 or the Structured Processing Engine (SPE) released in 2010? Yet another set of vapour-ware products never released, QA'd or sold, Also i'd love to know what happened to the 20,000 customers Autonomy alleged to have and whether Autonomy actually spent $100m in R&D per annum.....happy days Mike, see you and your gimp-boys in the docks!

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I don't know what a "real" doctor is "tpatterson82" since there are many kinds! But what a shame for all the hard working employees left behind. First the Dr said "all the good ones left" (really?) and now they have to suffer the upheaval of being smeared by association with these accusations. What a shame too for the families of those being accused who have to suffer the shame of their friends, colleagues and relatives wondering if these accusations are true? None of the headlines capture the real cost to them in all this....

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hmmm. so a PhD from Cambridge isn't a proper 'doctor'. Tells us all we need to know about you, tpatterson82. Sounds like you might be just another ex-employee who couldn't hack the pace. If there was any truth in any of this the SEC and the SFO would have already arrested Lynch and others. They are a massive flight risk. The man already has his own jet and enough cash to buy an AIRLINE if he wants to. It's just HP trying to come up with an excuse to make another massive write-down.

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