Hewlett-Packard Company (NYSE:HPQ) revealed in its FY2012 10-K filing on Thursday, that the Department of Justice has begun probes over its allegations that the British software firm Autonomy Corp. was involved in accounting malpractices before HP acquired it in October 2011. The takeover created headlines after HP claimed last month that it had been misled about the British firm’s financial performances. Consequently, HP shareholders sued the company and its auditors – KPMG and Deloitte – for failing to identify the irregularities.
Hewlett-Packard Company (NYSE:HPQ)’s statements prompted a furious response from the former chief executive of Autonomy, Mike Lynch. He said in a statement that he hasn’t been contacted by any regulatory authority. Mr. Lynch said he will cooperate with any investigation and, given the opportunity, he will explain Autonomy’s position.
The Federal Bureau of Investigation started probing HP’s allegations last month, the Wall Street Journal reported. The Palo Alto, California-based company said that it was contacted on November 21st, by the representatives of the U.S. Department of Justice that they have opened an investigation in the Autonomy deal. HP said that it has also provided information to the U.K. Serious Fraud Office and the Securities and Exchange Commission. The company is currently cooperating with all the three investigation agencies.
Last month, HP announced a $8.8 billion writedown, of which $5 billion was related to the value of Autonomy. Hewlett-Packard Company (NYSE:HPQ) said it started an internal probe when a senior Autonomy member came forward after Mike Lynch’s departure, to reveal a series of questionable accounting practices. HP’s then-CEO, Lee Apotheker, acquired Autonomy to spur growth in its software business.
In the Thursday’s 10-K filing, HP described how it reached the writedown amount. The company recalculated Autonomy’s profits and revenues after internal probes, and also considered HP’s recently declining stock prices to project forward the amount it expected to recoup from the acquisition.
However, Hewlett-Packard Company (NYSE:HPQ) didn’t mention the nature of alleged accounting improprieties. Mr. Lynch asked HP to be specific when making allegations, and defended Autonomy’s accounting practices. He said, “It is extremely disappointing that HP has again failed to provide a detailed calculation of its $5 billion write-down of Autonomy, or publish any explanation of the serious allegations it has made against the former management team, in its annual report filing today.”