The founder of enterprise search and knowledge management service company Autonomy is firing back at HP amid allegations that his company used sketchy accounting practices to inflate its value prior to its sale to HP in August 2011. In an interview with the Wall Street Journal (WSJ), Lynch said of HP's allegations that "they are completely and utterly wrong and we reject them completely."
This morning HP revealed that it will take an $8.8 billion impairment charge due to what it calls "serious accounting improprieties, misrepresentations, and disclosure failures" by Autonomy in the run up to its acquisition. HP claims that a "senior member" of Autonomy's leadership came forward after Lynch left the company, spurring a forensic review of Autonomy's accounting practices.
Lynch told WSJ that he was not aware of HP's allegations before they were made public this morning. "We have been ambushed," said Lynch. He pointed out that Autonomy was audited on a quarterly basis, and that HP was meticulous during its due diligence investigation into Autonomy before the acquisition.
"The figures are just mad," said Lynch. "You are talking about handing them an asset worth $12 billion and they are saying $9 billion of that they are taking off. That would be such an obvious massive thing with 300 people and all these firms doing due diligence, how could you possibly not spot it?
Lynch also mentions that the announcement seems "coincident with [HP] releasing the worst set of results in their 70-year company history."
It does seem incredible that HP and other entities could have missed accounting fraud on such a huge scale, and it's clear that Lynch intends to defend himself and his former company against HP's allegations. HP pledged in its statement this morning that it intends to "seek redress against various parties in the appropriate civil courts to recoup what it can for its shareholders." The lawsuits will be flying soon, bringing with them clarity on whether Autonomy's books were clean or not.