Hewlett-Packard Company (NYSE:HPQ) is facing a lawsuit filed by investors in connection with the $8.8 billion in losses incurred by the company, due to accounting irregularities in the acquisition of the software firm Autonomy Corporation for $11.1 billion last year, according to the report from Bloomberg.
The company reported in its fourth quarter earnings report last Tuesday that $5 billion of the $8.8 billion write-down is associated with the Autonomy acquisition. Hewlett-Packard Company (NYSE:HPQ) discovered serious “accounting improprieties, misrepresentation, and disclosure failures” on the transaction after a whistle blower came forward and tipped off people regarding the fraud. In addition, the company said, the issue has been brought to the attention of regulators in the United States and United Kingdom. Hewlett-Packard Company (NYSE:HPQ) is also planning to file a civil case against Autonomy.
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Hewlett-Packard Company (NYSE:HPQ) alleged that some of the former member executives of Autonomy misrepresented and inflated the financial performance of the British software firm before the acquisition. Former HP CEO Leo Apotheker initiated the acquisition of Autonomy during his tenure to expand its business offerings in cloud computing. He left the company in 2011, after constantly changing growth strategy and cutting profit outlook.
Last week, Mike Lynch, former CEO and founder of Autonomy, denied the allegations of HP. He emphasized that the management of the company should be blamed for the decline of the value of the software firm. According to him, it is impossible for the company to miss the accounting problems during its evaluation of the books because the amount of the write-down is huge. Lynch pointed out, “Look at the size of the write-down. If you’ve done meticulous due diligence with 300 people, you can’t get it that wrong.”
The investors filed civil securities lawsuit in the Federal Court of San Francisco. The law firm, Robbins Geller, Rudman, & Dowd LLP is representing the investors in the case.