Shareholders Sue Everyone Over HP/Autonomy DealBy: Sean Patterson - November 30, 2012
When HP announced last week that it was taking an $8.8 billion impairment charge, and that $5 billion it is related to “serious accounting improprieties, misrepresentation, and disclosure failures” at Autonomy before HP acquired the firm, it was clear that the lawsuits would soon be flying. Lawyers no doubt jumped into action before the earnings call was even over, and now the first related lawsuits have been filed.
According to a Reuters report, an HP shareholder has sued just about everyone involved with the acquisition of Autonomy a knowledge and enterprise search services company. HP’s board of directors, HP CFO Catherine Lesjak, HP CEO Meg Whitman, and former HP CEO Leo Apotheker are all named in the lawsuit. Four different auditing firms – Deloitte, KPMG, Barclays, and Perella Weinberg Partners – have also been sued, and a San Francisco Chronicle report states that former Autonomy CEO Mike Lynch has also been sued. Deloitte was name-dropped by Whitman during the announcement, and the firm has denied knowledge of any fraud, promising to cooperate with investigations.
The lawsuit alleges that HP executives and the auditing firms missed “red flags” about Autonomy’s accounting practices. They claim that due diligence was lacking, and that HP overpaid for Autonomy, costing the company billions. HP stated last week that an internal investigation uncovered fraudulent accounting practices at Autonomy before it bought the company for $10.2 billion in 2011. Lynch immediately began speaking out against the accusations, calling HP’s announcement an ambush and stating that the allegations are “completely and utterly wrong and we reject them completely.” Lynch went on to reveal that Autonomy had difficulty transitioning to HP’s corporate structure, and blamed infighting between HP divisions as the real cause of the value loss. He even filed an open letter to the company, challenging them to present their evidence against the company he founded.
HP, for it’s part, has stated that it is currently investigating the alleged “accounting improprieties, disclosure failures, and outright misrepresentations,” and that the issue is now with the U.K. Serious Fraud Office, the U.S. Securities and Exchange Commission, and the U.S. Department of Justice. The company did state, however, that it looks forward to hearing Lynch “answer questions under penalty of perjury.”