HP-Autonomy continues as former CEO demands explanation
updated 07:40 pm EST, Tue November 27, 2012
HP rebuffs Lynch's request for details of accusations
The fallout from HP's $8.8 billion write-down on Autonomy continues apace, with former Autonomy chief Mike Lynch now requesting that HP provide more details on allegations that Autonomy engaged in improper accounting. Lynch has defended autonomy, claiming that the company's finances were "handled in accordance with applicable regulations and accounting practices," and states that he "utterly reject[s] all allegations of impropriety." HP, for its part, has challenged Lynch to submit to questioning under oath about Autonomy's finances.
At issue is whether the accounting practices Autonomy used in reporting its finances were entirely above the board. HP alleges that an executive from Autonomy approached them after HP acquired the company, informing them that Autonomy's financial reporting was flawed and misleading. In announcing the write-down, HP accused Autonomy's former executives of a deliberate effort to inflate the company's financial metrics in order to mislead investors and potential buyers.
Lynch counters that much of HP's complaint is essentially a misunderstanding stemming from differences in accounting standards between American firms and some international firms.
Bloomberg reports that Lynch has filed an open letter with news organizations, asking HP's board for "immediate and specific explanations" of its charges, as well as supporting documentation. Lynch asks for HP to publish the calculations that led to its write-down figure for Autonomy, as well as a copy of the report HP filed with US and UK regulators.
In his letter, Lynch placed blame not with Autonomy, but at least partially with HP, citing "operational and financial mismanagement of Autonomy since the acquisition."
Meanwhile, Reuters carries word that HP has rebuffed Lynch's request. In an emailed response, HP said "the legal process is the correct method in which to bring out the facts and take action on behalf of our shareholders." The email continued: "we look forward to hearing Dr. Lynch and other former Autonomy employees answer questions under penalty of perjury."
In related news, more information has emerged on the civil suit filed against HP over the Autonomy fiasco. The investor who filed the class action suit reportedly claims that HP hid from investors the fact that it could not verify the reliability of Autonomy's financial statements. Further, the suit alleges that HP had not revealed to investors that it had tried to undo the Autonomy agreement before it closed due to accounting issues.
Shares of HPQ closed down 2.98 percent today at $12.36.
