Wednesday, November 28, 2012
THE founder of software company Autonomy, which has been accused by Hewlett-Packard of misrepresenting its finances ahead of its £7.1billion acquisition by the US technology giant last year, has issued a demand for details of the allegations.
In an open letter to the Hewlett-Packard (HP) board, Dr Mike Lynch, who left Autonomy in May this year, also challenged HP’s explanation for a US$5billion writedown which the group has attributed to the alleged issues within in Autonomy.
Earlier this month, HP said an internal investigation, launched in response to allegations by a “whistleblower” and led by accountancy firm PricewaterhouseCoopers, had revealed “serious accounting improprieties, misrepresentation and disclosure failures” at Autonomy.
HP added that the accusations of former staff “appear to have been a wilful effort to mislead investors and potential buyers” and said it has referred the matter to the Serious Fraud Office (SFO) in the UK and to the Securities and Exchange Commission (SEC) in the US.
Dr Lynch, who lives in Suffolk, and former colleagues at Autonomy, which is based in Cambridge, issued a robust denial, saying the management team in change at the time of the acquisition “flatly rejects these allegations, which are false”.
“HP’s due diligence review was intensive, overseen on behalf of HP by KPMG, Barclays and Perella Weinberg,” they added. “HP’s senior management has also been closely involved with running Autonomy for the past year.
“It took 10 years to build Autonomy’s industry-leading technology and it is sad to see how it has been mismanaged since its acquisition by HP.”
Now, in an open letter to the HP board, Dr Lynch has called on the company disclose full details of the allegations.
“I am writing today to ask you, the board of HP, for immediate and specific explanations for the allegations HP is making,” he says in the latter.
“HP should provide me with the interim report and any other documents which you say you have provided to the SEC and the SFO so that I can answer whatever is alleged, instead of the selective disclosure of non-material information via background discussions with the media.”
And Dr Lynch adds: “Can HP really state that no part of the $5bn writedown was, or should be, attributed to HP’s operational and financial mismanagement of Autonomy since the acquisition? In order to justify a $5bn accounting writedown, a significant amount of revenue must be involved.
“Please explain how such issues could possibly have gone undetected during the extensive acquisition due diligence process and HP’s financial oversight of Autonomy for a year from acquisition until October 2012.”
However, HP indicated that it would not engage directly with Dr Lynch and said it believed it was up to the UK and US authorities to decided how to proceed.
“The matter is in the hands of the authorities, including the UK Serious Fraud Office, the US Securities and Exchange Commission’s Enforcement Division and the UK Department of Justice, and we will defer to them as to how they wish to engage with Dr Lynch,” said HP in a statement.
“While Dr Lynch is eager for a debate, we believe the legal process is the correct method in which to bring out the facts and take action on behalf of our shareholders. In that setting, we look forward to hearing Dr Lynch and other former Autonomy employees to answer questions under penalty of perjury.”