Autonomy’s Former Execs “Welcome” FRC Investigation
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Back in November 2012, HP announced its dismal quarterly results and blamed around $5 billion of its $8.8 billion impairment charge on “serious accounting improprieties, misrepresentations, and disclosure failures” at Autonomy prior to its purchase by HP in 2011. Autonomy founder Mike Lynch shot back at HP immediately, starting a website and issuing an open letter accusing HP of mismanagement.
Though HP did not address the criticism directly, it did cheekily reply that it “look[s] forward to hearing Dr. Lynch and other former Autonomy employees answer questions under penalty of perjury.” Since that time HP’s comment on the matter has been that the case is in the hands of authorities such as the U.K. Serious Fraud Office and the U.S. Securities and Exchange Commission.
This week it was revealed that the U.K.’s Financial Reporting Council (FRC) is investigating Autonomy’s books from 2009 to 2011. The FRC investigation will take place in consultation with the Institute of Chartered Accountants in England and Wales (ICAEW).
Through the website created by Lynch, former Autonomy execs boldly proclaimed that they “welcome” the FRC investigation. The statement, in full:
We note the announcement by the UK’s Financial Reporting Council (FRC) that it has begun an investigation of the financial reporting of Autonomy for the period from 1 January 2009 to 30 June 2011. 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.
Depending on what the FRC uncovers, either Lynch or HP will have some serious explaining to do. Besides embarrassment and possible criminal implications, the investigation could end up playing a large role in the lawsuits HP’s allegations have spawned.