Former Autonomy CEO Mike Lynch denies HP "impropriety" claims

News 20 Nov, 2012

Software company's former chief hits back at hardware giant's accusations about financial irregularities at firm.

Former Autonomy CEO Mike Lynch has denied that “serious accounting improprieties” went on at the firm before it was snapped up by HP last year.

As reported by IT Pro, the hardware giant confirmed earlier today that it would foot a $8.8 billion impairment charge related to its acquisition of the Cambridge-based software company in October 2011.

In a statement, HP claimed the charge had been caused by “accounting improprieties, misrepresentations and disclosure failures” by Autonomy's management team, which were used to inflate the company’s asking price.

The former management team of Autonomy was shocked to see this statement today.

“These efforts appear to have been a wilful effort to mislead investors and potential buyers, and severely impacted HP management’s ability to fairly value Autonomy at the time of the deal,” the company said in a statement.

The alleged “improprieties” came to light after a senior member of Autonomy’s leadership team blew the whistle on a series of “questionable accounting and business practices” at Autonomy before the deal took place, HP has claimed.

“This individual provided numerous details about which HP previously had not knowledge or visibility,” said HP’s statement.

The whistleblower is understood to have flagged these issues to HP after Lynch stepped down as Autonomy’s CEO in May.

“HP initiated an intense internal investigation, including a forensic review by PricewaterhouseCoopers of Autonomy’s historical financial results...as a result of that investigation, HP now believes Autonomy was substantially overvalued at the time of its acquisition,” the statement added.

The vendor has referred the issue to the Serious Fraud Office in the UK and the US Securities and Exchange Commission’s Enforcement Division for civil and criminal investigation, it emerged earlier today.

However, in a statement to news site Reuters, Lynch said he “flatly rejected” HP allegations, and expressed shock at the claims made against his former company.

"The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false," a spokesperson speaking on behalf of Lynch said.

"HP's due diligence review was intensive, overseen on behalf of HP by KPMG, Barclays and Perella Weinberg. HP's senior management has also been closely involved with running Autonomy for the past year,” they added.