Authorities in the US have already been looking into Hewlett-Packard’s allegations that Autonomy – the company it purchased in 2011 in a deal that led to $5 billion worth of write-downs for HP last year – misrepresented its financial metrics ahead of the sale. Now the UK’s Financial Reporting Council (FRC) is doing the same.
The FRC announced its investigation in a statement on Monday, in which it said it was examining Autonomy’s published accounts for the period between 1 January 2009 and 30 June 2011. Four months ago, HP CEO Meg Whitman requested that US and UK authorities look into Autonomy’s pre-deal accounting.
Mike Lynch, the former CEO who steered the data management company’s sale to HP before jumping ship after lousy results, responded via the blog he and other ex-Autonomy managers set up to combat HP’s fraud claims, saying:
“As a member of the FTSE 100 the accounts of Autonomy have previously been reviewed by the FRC, including during the period in question, and no actions or changes were recommended or required.
“We welcome this investigation. Autonomy received unqualified audit reports throughout its life as a public company. This includes the period in question, during which Autonomy was audited by Deloitte. We are fully confident in the financial reporting of the company and look forward to the opportunity to demonstrate this to the FRC.”
Whatever the outcome of the investigation, the UK authorities don’t appear to be treating what may or may not have happened as a criminal matter, as HP has called for. The FRC indicated that penalties may include “an unlimited fine, exclusion from membership of a professional body… and withdrawal of practising certificates or licences.” I have asked the FRC to clarify whether Autonomy or Deloitte — or both parties — is under investigation.