Report: HP knew of Autonomy accounts before whistle was blown

Mike Lynch tells Meg Whitman to explain herself to shareholders or resign

HP was aware of some of Autonomy's accounting practices long before a whistle-blower lifted the lid on them, according to a Financial Times (FT) investigation.

Back in 2011, HP bought the UK software firm for $11.1bn (£7bn). But less than a year after the acquisition, it recorded an $8.8bn writedown on the deal owing to what it described as "serious accounting improprieties, misrepresentation and disclosure failures".

The issues were made public by a former Autonomy staff member who came forward, but the FT investigation suggests that HP execs were already aware of the practices they are now contesting.

According to the FT, Autonomy chalked up sales to resellers even if the VAR had not secured an end user for the tech, provided there was no way the reseller could return the kit and get their money back from the vendor.

Documents seen by the paper show that HP and Autonomy had discussed this method of accounting - referred to as "deferred sales" - via email, before the whistle-blower went public.

The investigation also claims that the US giant was aware of Autonomy buffing up its revenue by including sales of hardware. The allegations could weaken HP's claims that it was duped into paying more for the firm than it should have.

Mike Lynch, former Autonomy boss, said on his website that the revelations prove his firm was open about its accounts with its auditors, Deloitte.

"[HP chief executive] Meg Whitman accused Autonomy of 'active concealment' but these revelations prove we were open and transparent with our auditors who continue to stand by the accounts," he said.

"Meg Whitman must answer to her shareholders with what she knew, when she knew it, and how she and her senior colleagues made such factually incorrect and serious statements that were so easy to check from the audit packs. Why would Meg say we had withheld information from our auditors? She should explain or resign."

But in a statement sent to Reuters, HP said it knew nothing until the whistle-blower came forward.

"While HP eventually learned that a portion of Autonomy's revenues were related to hardware sales, we knew nothing of the accounting improprieties, misrepresentations and disclosure failures related to such sales until after a senior Autonomy executive came forward and HP conducted an extensive investigation," it said.